Real Estate Math
A Missoula rental property has $85,000 gross annual income, 8% vacancy, $32,000 operating expenses, and a 7.5% cap rate. What is the estimated property value?
A$520,000
B$620,000✓ Correct
C$680,000
D$590,000
Explanation
EGI = $85,000 x (1 - 0.08) = $85,000 x 0.92 = $78,200. NOI = $78,200 - $32,000 = $46,200. Value = NOI / Cap Rate = $46,200 / 0.075 = $616,000.
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