Three highly similar and competitive income-producing properties within two blocks of the subject property have sold this month. All three offer essentially the same amenities and services as the subject property. The sale prices and estimated first-year NOI for each of the comparable properties are as follows: $$\begin{array} { | c | c | c | }
\hline \text { Cormarable } & \text { Srice } & \mathrm { NOI } _ { 1 } \
\hline \mathrm { A } & \$ 500,000 & \$ 55,000 \
\hline \mathrm { B } & \$ 420,000 & \$ 50,400 \
\hline \mathrm { C } & \$ 475,000 & \$ 53,400 \
\hline
\end{array}$$
Using the information provided, calculate the overall capitalization rate by direct market extraction assuming each property is equally comparable to the subject.
A) 11.0%
B) 11.2%
C) 11.4%
D) 12.0%

Question

Three highly similar and competitive income-producing properties within two blocks of the subject property have sold this month. All three offer essentially the same amenities and services as the subject property. The sale prices and estimated first-year NOI for each of the comparable properties are as follows: $$\begin{array} { | c | c | c | } 
\hline \text { Cormarable } & \text { Srice } & \mathrm { NOI } _ { 1 } \
\hline \mathrm { A } & \$ 500,000 & \$ 55,000 \
\hline \mathrm { B } & \$ 420,000 & \$ 50,400 \
\hline \mathrm { C } & \$ 475,000 & \$ 53,400 \
\hline
\end{array}$$
Using the information provided, calculate the overall capitalization rate by direct market extraction assuming each property is equally comparable to the subject.
A) 11.0%
B) 11.2%
C) 11.4%
D) 12.0%

Quizplus · Accepted Answer

The overall capitalization rate is calculated by dividing the NOI by the sale price for each property and then averaging the rates. For A: 55,000/500,000 = 11%, for B: 50,400/420,000 = 12%, for C: 53,400/475,000 = 11.24%. The average is (11% + 12% + 11.24%) / 3 = 11.41%, approximately 11.4%.

Three Highly Similar and Competitive Income-Producing Properties Within Two Blocks