Real Estate Math
A South Dakota property has a monthly gross income of $4,500 and a 5% vacancy allowance. Annual operating expenses are $22,000. At a 7% cap rate, what is the value?
A$628,571
B$635,000
C$418,571✓ Correct
D$530,571
Explanation
Annual gross income: $4,500 × 12 = $54,000. Less 5% vacancy: $54,000 × 0.95 = $51,300 (EGI). NOI: $51,300 - $22,000 = $29,300. Value: $29,300 ÷ 0.07 = $418,571. Closest option: actual answer at 7% = $418,571. None of the options match exactly; $418,571 would be correct.
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