Real Estate MathPregunta 113 de 120
An investment property generates $30,000 in net operating income and is valued using an 8 percent capitalization rate. What is its indicated value?
a.$375,000
b.$240,000
c.$2,400,000
d.$37,500
Explicación
In the income approach, value equals net operating income divided by the cap rate: $30,000 / 0.08 = $375,000. A lower cap rate produces a higher value for the same income. This formula is central to valuing income property.
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