Real Estate Math
A Vermont duplex has an effective gross income of $36,000 per year and operating expenses totaling $12,000. What is the net operating income and, at a 5% cap rate, what is the estimated value?
A$480,000✓ Correct
BNOI $24,000; Value $600,000
CNOI $36,000; Value $720,000
DNOI $12,000; Value $240,000
Explanation
NOI = EGI − Operating Expenses = $36,000 − $12,000 = $24,000. Value = NOI ÷ Cap Rate = $24,000 ÷ 0.05 = $480,000.
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