Real Estate Math

A Massachusetts investor pays $820,000 for a commercial property and receives an annual NOI of $65,600. What is the capitalization rate?

A8%✓ Correct

B7.5%

C6.5%

D9%

Explanation

Cap Rate = NOI ÷ Value = $65,600 ÷ $820,000 = 0.08 = 8%. Using the values given ($820,000, $65,600), apply the appropriate formula.. The correct answer is 8%.. This is a common calculation on the Massachusetts real estate exam.

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