Question

If the annual net income from a commercial property is $22,000, and the capitalization rate is 8%, what is the value of the property using the income approach?

Answer 1

Answer: $275,000

Step-by-step explanation:

Given that,

Annual net income = $22,000

Capitalization rate = 8%

Value of the property = ?

Capitalization rate =
`(Net\ operating\ income)/(Current\ property\ value)`

8% =
`(22,000)/(Current\ property\ value)`

Value of the property =
`(22,000*100)/(8)`

= $275,000