The cap rate if a building sells for $2,000,000 with an noi of $150,000 is 7.5%
What is cap rate?
This is the ratio of the net operating income (NOI) of a business to its current market value. Mathematically;
cap rate = NOI/market rate
Given the following
NOI = $150,000
Market value = $2,000,000
Substitute
cap rate = 150,000/2,000,000
cap rate = 0.075 = 7.5%
Hence the cap rate if a building sells for $2,000,000 with an noi of $150,000 is 7.5%
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