Real Estate Math
An Ohio appraiser uses a 7.5% cap rate to value a property with $45,000 NOI. What is the indicated value?
A$500,000
B$560,000
C$600,000✓ Correct
D$650,000
Explanation
Value = NOI / Cap Rate = $45,000 / 0.075 = $600,000.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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