Real Estate Math
A West Virginia duplex generates $1,400/month from each unit. Using a cap rate of 8%, what is the estimated value?
A$210,000
B$262,500
C$315,000
D$420,000✓ Correct
Explanation
Annual gross rent = 2 × $1,400 × 12 = $33,600. Assuming a 30% expense ratio: NOI = $33,600 × 70% = $23,520. Value = $23,520 ÷ 0.08 = $294,000. Without expense assumption, using gross rent ÷ cap rate: $33,600 ÷ 0.08 = $420,000 (gross income approach). The $315,000 would reflect a different scenario. Best answer given the options: $315,000.
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