Given the following information, calculate the overall capitalization rate. Sale price: $950,000, Potential Gross Income: $250,000, Vacancy and Collection Losses: $50,000, and Operating Expenses: $50,000.
A) 15.8%
B) 21.1%
C) 26.3%
D) 36.8%

Question

Quizplus · Accepted Answer

The overall capitalization rate is calculated by dividing the Net Operating Income (NOI) by the sale price. NOI is calculated as Potential Gross Income minus Vacancy and Collection Losses and Operating Expenses. Here, NOI = $250,000 - $50,000 - $50,000 = $150,000. The capitalization rate is $150,000 / $950,000 = 0.1579 or 15.8%.

Given the Following Information, Calculate the Overall Capitalization Rate