If a rental property has a return rate of 8% and a monthly net rental income of $600, what is the market value of the property?

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To determine the market value of the property when given the monthly net rental income and the return rate, you can apply the formula for valuing income-producing properties. The market value can be calculated by using the formula:

Market Value = Annual Net Income / Capitalization Rate

First, convert the monthly net rental income to an annual amount. Since the monthly net rental income is $600, the annual net income would be:

Annual Net Income = Monthly Net Income x 12

Annual Net Income = $600 x 12 = $7,200

Next, you can apply the return rate, or capitalization rate, which is given as 8% (0.08). Now, plug the annual net income and capitalization rate into the formula:

Market Value = Annual Net Income / Capitalization Rate

Market Value = $7,200 / 0.08 = $90,000

Thus, the market value of the property is correctly determined to be $90,000. Understanding how to calculate market value using net income and the capitalization rate is essential in real estate evaluations, especially for investors looking to assess the profitability of a rental property.

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