Question

An investment property has a net operating in come of $47,700 per year. Buildings of this type are selling at a rate of return of 9%. What is the estimated value of the building?

Answer 1

The estimated value of the building is $530,000.

Step-by-step explanation:

To estimate the value of the building, we can use the formula for the rate of return on investment (ROI). The formula is:

ROI = Net operating income / Value of the building

We know the net operating income is $47,700 per year and the rate of return is 9%. Rearranging the formula, we can solve for the value of the building:

Value of the building = Net operating income / ROI

Substituting the values into the equation:

Value of the building = $47,700 / 0.09 = $530,000

Therefore, the estimated value of the building is $530,000.