Real Estate Math
A Minnesota property has a total annual NOI of $156,000 and is valued at $2,100,000. What is the cap rate, and if market cap rates are 6.5%, is the property over or undervalued?
ACap rate 7.43%; property is undervalued relative to market✓ Correct
BCap rate 7.43%; property is overvalued relative to market
CCap rate 6.5%; property is priced at market
DCap rate 7.0%; property is at market value
Explanation
Cap rate = $156,000 / $2,100,000 = 7.43%.
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