Real Estate Math
A Michigan property has an annual NOI of $48,000. If the investor requires a 9% return, what should they pay for the property?
A$432,000
B$533,333✓ Correct
C$480,000
D$576,000
Explanation
Value = NOI / Cap Rate. $48,000 / 0.09 = $533,333. This is the income capitalization method: divide net operating income by the required rate of return to determine maximum purchase price.
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