Real Estate Math
A Missouri investor buys an 8-unit apartment for $560,000. Annual gross rent is $84,000, expenses are $28,000, and vacancy is 5%. What is the cap rate?
A8%
B9%✓ Correct
C10%
D7%
Explanation
Vacancy loss = $84,000 × 5% = $4,200. EGI = $79,800. NOI = $79,800 − $28,000 = $51,800. Cap rate = $51,800 ÷ $560,000 = 9.25% ≈ 9%.
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