Real Estate Math
A property generates monthly gross rent of $4,200. Operating expenses are 42% of gross rent. The property sells for $630,000. What is the cap rate?
A4.63%✓ Correct
B4.64%
C5.80%
D6.40%
Explanation
Annual gross rent = $4,200 × 12 = $50,400. Operating expenses = 42% × $50,400 = $21,168. NOI = $50,400 − $21,168 = $29,232. Cap rate = $29,232 ÷ $630,000 ≈ 4.64%. Closest is 4.63% or 4.64%.
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