Real Estate Math
A Montana commercial property produces $120,000 NOI. A buyer wants a 9% return. What is the maximum purchase price they would pay?
A$1,080,000
B$1,200,000
C$1,333,333✓ Correct
D$10,800,000
Explanation
Maximum price = NOI / Desired Cap Rate = $120,000 / 0.09 = $1,333,333. To solve this, multiply the relevant values: $120,000 at 9%.. The correct answer is $1,333,333.. This is a common calculation on the Montana real estate exam.
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