Real Estate Math
A Nevada investor uses the income approach to value a small apartment building. The NOI is $72,000 and comparable cap rates are 8%. What is the estimated value?
A$800,000
B$900,000✓ Correct
C$720,000
D$1,000,000
Explanation
Value = NOI / Cap Rate = $72,000 / 0.08 = $900,000. To solve this, multiply the relevant values: $72,000 at 8%.. The correct answer is $900,000.. This is a common calculation on the Nevada real estate exam.
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