Real Estate Math
A Washington property produces a monthly net income of $4,200. The investor paid $640,000. What is the annual cap rate?
A6.5%
B7.0%
C7.5%
D7.875%✓ Correct
Explanation
Annual NOI = $4,200 × 12 = $50,400. Cap rate = $50,400 ÷ $640,000 = 0.07875 = 7.875%. Using the values given ($4,200, $640,000), apply the appropriate formula.. The correct answer is 7.875%.. This is a common calculation on the Washington real estate exam.
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