Abuilding valued at $245,000 contains four apartments that each rent for $370 per month. the owner estimates that net operating income is 65% of gross rentals. what is the capitalization rate?

0.0471 or 4.71%.

Step-by-step explanation:

We have been given that a building valued at $245,000 contains four apartments that each rent for $370 per month.

Let us find monthly income from 4 apartments by multiplying 370 by 4 as:

Let us find annual gross income by multiplying monthly income by 12:

Now, we will find net operating income by finding 65% of gross annual rentals as:

We know that the capitalization rate is the ratio between the net income of the property and its original price or capital cost.

So, we can find capitalization rate by dividing $11,544 by $245,000.

Therefore, the capitalization rate is approximately 0.0471 or 4.71%.

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step-by-step explanation:

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