Real Estate Math
A property generates NOI of $72,000. The building value is $800,000, land is $100,000. Using the building residual technique, if the land capitalization rate is 6% and building rate is 8%, what is the building income attributed to the building?
A$66,000✓ Correct
B$72,000
C$6,000
D$64,800
Explanation
Land income = Land Value × Land Cap Rate = $100,000 × 6% = $6,000. Building income = Total NOI - Land income = $72,000 - $6,000 = $66,000.
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