Florida Real Estate Practice Exam

What is the cap rate of a property having an income value of $200,000 and net operating income of $40,000?

1. 20%

2. 25%

3. 40%

4. 5%

The correct answer is: 20%

The cap rate for a property is the ratio of its net operating income to its property value. In this case, the income value of the property is $200,000 and its net operating income is $40,000. To find the cap rate, we divide $40,000 by $200,000 and then multiply by 100 to get a percentage. This calculation gives us 20%, so option A is the correct answer. Options B and C are incorrect because they do not accurately reflect the cap rate formula. Option B would be the result if you divided the income value by the net operating income, and option C would be the result if you divided the net operating income by the income value. Option D is also incorrect because it is too low. The cap rate is typically expressed as a percentage, and a 5% cap rate in this scenario would mean the property is