Property Management
A capitalization rate of 7% on a $500,000 Nevada apartment building indicates an annual NOI of:
A$25,000
B$35,000✓ Correct
C$50,000
D$70,000
Explanation
NOI = Value × Cap Rate = $500,000 × 0.07 = $35,000.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Math Concepts
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