Real Estate Math
A Massachusetts investor purchases a duplex for $420,000. Annual gross rents total $36,000 and operating expenses are $14,400. What is the cap rate?
A6.57%
B5.14%✓ Correct
C8.57%
D4.29%
Explanation
NOI = $36,000 − $14,400 = $21,600. Cap rate = $21,600 / $420,000 = 0.0514 = 5.14%. Using the values given ($420,000, $36,000), apply the appropriate formula.. The correct answer is 5.14%.. This is a common calculation on the Massachusetts real estate exam.
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