A revenue-generating property has five (5) residential units, each renting for $1,200 per month, and two (2) commercial units, each renting for $2,500 per month. Annual operating expenses are $45,000. If the capitalization rate for similar properties in the area is 6.5%, what is the estimated market value of this property?

Question: A revenue-generating property has five (5) residential units, each renting for $1,200 per month, and two (2) commercial units, each renting for $2,500 per month. Annual operating expenses are $45,000. If the capitalization rate for similar properties in the area is 6.5%, what is the estimated market value of this property?

Answer options: ✅ $1,568,205.13

• $1,846,153.85
• $1,615,384.62
• $1,723,076.92

Correct answer: $1,568,205.13

Explanation: Total annual rental income = (5 * $1,200 * 12) + (2 * $2,500 * 12) = $72,000 + $60,000 = $132,000. Net Operating Income (NOI) = $132,000 - $45,000 = $87,000. Market Value = NOI / Cap Rate = $87,000 / 0.065 = $1,338,461.54.