Real Estate Math
An investor wants a 10% return on investment (ROI) on a commercial property. The property's NOI is $55,000 per year. What is the maximum the investor should pay?
A$500,000
B$550,000✓ Correct
C$600,000
D$495,000
Explanation
Maximum price = NOI / Desired Cap Rate = $55,000 / 0.10 = $550,000. Paying more than $550,000 would yield less than a 10% return on investment based on the current NOI.
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