Real Estate Math
An Oklahoma property has 6 units renting at $925/month each. Annual operating expenses are $22,320. Vacancy rate is 8%. At a 9% cap rate, what is the indicated value?
A$432,800✓ Correct
B$421,200
C$365,700
D$376,800
Explanation
GPI = 6 × $925 × 12 = $66,600. EGI = $66,600 × (1 − 0.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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