Real Estate Math
An office building costs $4,200,000 and produces an NOI of $336,000 annually. What is the capitalization rate?
A6%
B7%
C8%✓ Correct
D9%
Explanation
Cap Rate = NOI ÷ Value = $336,000 ÷ $4,200,000 = 0.08 = 8%. Using the values given ($4,200,000, $336,000), apply the appropriate formula.. The correct answer is 8%.. This is a common calculation on the Tennessee real estate exam.
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