Real Estate Math
A 4-unit Nebraska building sold for $520,000. The cap rate is 8.5% and the NOI is $44,200. What is the difference between the implied value at 8.5% and the actual sale price?
A$520,000✓ Correct
B$39,412 above the implied value
CExactly at implied value
D$52,000 above the implied value
Explanation
Implied value at 8.5% = $44,200 ÷ 0.085 = $520,000. Exactly at implied value. But if sale price were $560,000: $44,200 ÷ 0.085 = $520,000. Sale was $520,000 = implied value. Answer: exactly at implied value.
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