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?

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.