Real Estate Math
A Texas commercial property has the following financials: Purchase price $950,000, loan $712,500 at 5.75% for 25 years (monthly payment $4,580), NOI $75,000. What is the overall capitalization rate (OAR)?
A7.89%✓ Correct
B8.5%
C6.5%
D9%
Explanation
Overall (or going-in) cap rate = NOI / Purchase Price = $75,000 / $950,000 = 0.0789 = 7.89%.
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