Real Estate Math
A property with an NOI of $45,000 is valued using a cap rate of 7.5%. What is the estimated property value?
A$337,500
B$600,000✓ Correct
C$450,000
D$500,000
Explanation
Property Value = NOI / Cap Rate = $45,000 / 0.075 = $600,000. This is the fundamental income capitalization formula. A lower cap rate produces a higher value; a higher cap rate produces a lower value for the same NOI.
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