Real Estate Math

A Texas commercial property has an annual NOI of $80,000. The buyer wants a 9% return. What is the maximum offer price?

A$720,000

B$888,889✓ Correct

C$800,000

D$900,000

Explanation

Maximum price = NOI / Cap Rate = $80,000 / 0.09 = $888,889. At $888,889, the property would yield exactly 9% (cap rate). Paying more reduces the yield below 9%; paying less increases it above 9%.

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