Ace the Arizona Real Estate Exam 2025 – Unlock Your Property Dreams!

Question: 1 / 1505

What is the value of an apartment complex yielding a net semi-monthly income of $14,000 with a cap rate of 8%?

$2,100,000

$2,380,950

$2,688,000

$4,200,000

To determine the value of the apartment complex based on its net income and capitalization rate, you can use the formula:

Value = Net Operating Income (NOI) / Capitalization Rate.

In this case, the net semi-monthly income is $14,000. Since capitalization rates are typically expressed on an annual basis, you need to convert that semi-monthly income into an annual figure.

There are 24 semi-monthly periods in a year, so the annual NOI would be calculated as follows:

Annual NOI = Semi-monthly income × Number of periods per year

Annual NOI = $14,000 × 24 = $336,000.

Next, you take this annual NOI and divide it by the cap rate, which is 8% or 0.08 in decimal form:

Value = $336,000 / 0.08 = $4,200,000.

This calculation shows that the apartment complex's value is indeed $4,200,000 based on the specified income and capitalization rate. Thus, this is the correct answer, as it follows the standard method for appraising property value in real estate.

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