A potential buyer, interested in an income property in Sherbrooke, asks their broker, Marc, about the capitalization rate (cap rate) of a 6-plex with a Net Operating Income (NOI) of $90,000 and a market value of $1,200,000. How should Marc calculate the cap rate for this property?

Question: A potential buyer, interested in an income property in Sherbrooke, asks their broker, Marc, about the capitalization rate (cap rate) of a 6-plex with a Net Operating Income (NOI) of $90,000 and a market value of $1,200,000. How should Marc calculate the cap rate for this property?

Answer options: ✅ Cap Rate = Net Operating Income / Market Value

• Cap Rate = Market Value / Gross Operating Income
• Cap Rate = Gross Operating Income / Net Operating Income
• Cap Rate = Annual Rent / Market Value

Correct answer: Cap Rate = Net Operating Income / Market Value

Explanation: The capitalization rate is calculated by dividing the Net Operating Income (NOI) by the property's market value. In this case, $90,000 / $1,200,000 = 0.075 or 7.5%.