Real Estate Math
An investor in the Outer Banks buys a vacation rental property for $650,000. The property generates $52,000 annual gross income and has annual expenses of $20,800. What is the cap rate?
A4.8%✓ Correct
B8%
C6.4%
D4%
Explanation
NOI = $52,000 – $20,800 = $31,200. Cap Rate = NOI / Purchase Price = $31,200 / $650,000 = 0.
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