Real Estate Math
A NJ investor is considering purchasing a 6-unit building with a gross annual rent of $108,000, a vacancy rate of 8%, and operating expenses of $35,000. At an 8% cap rate, what is the property's value?
A$804,500✓ Correct
B$912,500
C$787,500
D$927,500
Explanation
EGI = $108,000 × (1 – 0.08) = $99,360. NOI = $99,360 – $35,000 = $64,360. Value = $64,360 ÷ 0.08 = $804,500.
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