Question

g 3) You are interested in purchasing an apartment complex for $2,000,000 that has Net Operating Income (NOI) of $120,000 and is financed with an 80% LTV mortgage at 4% A. What is the Cap Rate

Answer 1

Answer:

the cap rate is 6%

Explanation:

The computation of the cap rate is as follows:

= Net operating Income ÷ Current market value of property

= $120,000 ÷  $2,000,000

= .06

=  6%

Hence, the cap rate is 6%

We simply divided the net operating income from the Current market value of property so that the cap rate could come