Property Management Licensing Practice Exam · Question
A commercial property in Toronto has an effective gross income (EGI) of $750,000 and total operating expenses of $250,000. The property was recently valued at $10,000,000. What is the capitalization rate for this property?
The capitalization rate (cap rate) is calculated as Net Operating Income (NOI) divided by the property's value. NOI = EGI - Operating Expenses = $750,000 - $250
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Question: A commercial property in Toronto has an effective gross income (EGI) of $750,000 and total operating expenses of $250,000. The property was recently valued at $10,000,000. What is the capitalization rate for this property?
Answer options: ✅ 5.0%
- 6.0%
- 7.5%
- 10.0%
Correct answer: 5.0%
Explanation: The capitalization rate (cap rate) is calculated as Net Operating Income (NOI) divided by the property's value. NOI = EGI - Operating Expenses = $750,000 - $250,000 = $500,000. Cap Rate = $500,000 / $10,000,000 = 0.05 or 5.0%.
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