Real Estate Math
A commercial property has annual NOI of $95,000 and was purchased for $1,200,000. After 5 years, the property's NOI has grown to $110,000 and the market cap rate is 7%. What is the estimated current value?
A$1,357,143
B$1,571,429✓ Correct
C$1,200,000
D$1,450,000
Explanation
Current Value = Current NOI / Current Cap Rate = $110,000 / 0.07 = $1,571,429. The property has increased in value due to NOI growth even though the cap rate remained the same. This illustrates how income growth drives value appreciation in commercial real estate.
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