Question

If the annual net income from a commercial property is $22,000, and the capitalization rate is 8%, what is the value of the property using the income approach?

Answer 1

Answer: $275,000

Explanation:

Given that,

Annual net income = $22,000

Capitalization rate = 8%

Value of the property = ?

Capitalization rate = $\frac{Net\ operating\ income}{Current\ property\ value}$

                        8% = $\frac{22,000}{Current\ property\ value}$

Value of the property = $\frac{22,000\times100}{8}$

                                    = $275,000