Question

An office building has a potential gross income of $12,600 per year. The vacancy rate is 5% and the annual expenses are $3,600. What is the market value if the capitalization rate is 12%?

Answer 1

Answer:

The answer is $69750.00

Explanation

Calculation of market value using income approach is calculated as follows;

Value= Net operating income (NOI) /Cap rate

Net Operating Income (NOI) is potential rental income plus any additional property-related income minus vacancy losses minus total operating expenses.

Value= [12600 - (12600*0.05) - 3600] / 0.12

 Value        =$69759