What is the Value of a Property with a PGRI of $740,000 and a 22% Market Capitalization Rate?

D

To calculate the value of the property, we need to use the income approach, specifically the direct capitalization method. The value of a property can be determined by dividing the net operating income (NOI) by the market capitalization rate.

First, let's calculate the net operating income (NOI) of the property. The NOI is the potential gross rental income (PGRI) minus operating expenses, excluding insurance and property taxes.

Operating expenses = 30% of gross rents Operating expenses = 0.30 * $740,000 Operating expenses = $222,000

NOI = PGRI - Operating expenses - Insurance - Property taxes NOI = $740,000 - $222,000 - $16,800 NOI = $501,200

Now, we can calculate the value of the property using the market capitalization rate. The market capitalization rate is expressed as a percentage, so we need to convert it to a decimal.

Market capitalization rate = 22% = 0.22

Value of property = NOI / Market capitalization rate Value of property = $501,200 / 0.22 Value of property ≈ $2,278,182

Therefore, the correct answer is D. $2,278,182.