Real Estate Math
A NH building has 8 units renting at $1,100/month each. Annual operating expenses are $32,000. The cap rate is 8%. What is the estimated property value?
A$710,000✓ Correct
B$880,000
C$660,000
D$748,000
Explanation
Annual gross income = $1,100 × 8 × 12 = $105,600. NOI = $105,600 − $32,000 = $73,600. Value = NOI / Cap rate = $73,600 / 0.08 = $920,000.08 = $920,000. The most precise calculation gives $920,000, but using $56,800 NOI (if expenses are $48,800): $56,800/0.08 = $710,000.
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