Real Estate Math
A building in New York has 20 rental units. Fifteen units are rented at $1,500/month and five units are rented at $1,800/month. The building sold at a 7.5% cap rate. What was the approximate sale price (assuming full occupancy and no expenses for simplicity)?
A$4,320,000
B$5,040,000✓ Correct
C$3,780,000
D$3,960,000
Explanation
Annual gross income (NOI since no expenses) = (15 × $1,500 × 12) + (5 × $1,800 × 12) = $270,000 + $108,000 = $378,000. Sale price = NOI ÷ Cap Rate = $378,000 ÷ 0.
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