Ayesha owns a rental property on Main street, but she is considering selling the

Question

Ayesha owns a rental property on Main street, but she is considering selling the property
to another real estate investor. In preparation for negotiating a price, Ayesha wants to
know the value of the property. The Net Operating Income (NOI) is the cash flow from
real estate and the Cap Rate is the rate, where NOI is rental revenue less all expenses
except loan servicing. The property has an NOI of Rs-12,000 per year. The local real
estate market has a cap rate of 6%. What is a fair price for the property assuming that
the building's life is 35 years?

Explanation / Answer

1.0635×12000=92,233. The above solution is based on how much NOI the property can earn in 35 years. So we multiplied the cap rate 35 times to see the worth of the property.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.