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23 October, 17:56

An office building has a potential gross income of $12,600 per year. The vacancy rate is 5% and the annual expenses are $3,600. What is the market value if the capitalization rate is 12%?

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  1. 23 October, 18:23
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    The answer is $69750.00

    Explanation

    Calculation of market value using income approach is calculated as follows;

    Value = Net operating income (NOI) / Cap rate

    Net Operating Income (NOI) is potential rental income plus any additional property-related income minus vacancy losses minus total operating expenses.

    Value = [12600 - (12600*0.05) - 3600] / 0.12

    Value = $69759
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Home » Business » An office building has a potential gross income of $12,600 per year. The vacancy rate is 5% and the annual expenses are $3,600. What is the market value if the capitalization rate is 12%?
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