A Texas apartment building with 24 units rents at $850/month per unit. The property has a 6% vacancy rate and a cap rate of 8.5%. What is the estimated property value?

Explanation

Potential Gross Income = 24 × $850 × 12 = $244,800. Effective Gross Income = $244,800 × (1 – 6%) = $244,800 × 0.94 = $230,112. Assuming operating expenses are 40% of EGI (common rule of thumb if not given): NOI = $230,112 × 60% = $138,067. Value = $138,067 / 0.085 = $1,624,318. Without expense deduction: if EGI = NOI (no expenses given): Value = $230,112 / 0.085 = $2,707,200. Closest to $2,652,494.