Real Estate Math

A Minnesota commercial property with a value of $1,200,000 has an annual NOI of $84,000. The property's cap rate is:

A6.0%

B7.0%✓ Correct

C8.0%

D7.5%

Explanation

Cap rate = NOI / Value = $84,000 / $1,200,000 = 0.07 = 7.0%. Understanding how to calculate and interpret cap rates is fundamental for Minnesota commercial real estate professionals. A 7% cap rate is typical for moderate-risk commercial properties in many Minnesota markets.

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