If a property is valued at $250,000 with a cap rate of 10%, what is the net operating income?

To find the net operating income (NOI) of a property using the capitalization rate (cap rate), you can use the formula:

[ \text{NOI} = \text{Property Value} \times \text{Cap Rate} ]

In this case, the property value is $250,000, and the cap rate is 10%, which can be expressed as 0.10 in calculations.

Using the formula, you would calculate the NOI as follows:

[ \text{NOI} = 250,000 \times 0.10 = 25,000 ]

This means that the net operating income for the property is $25,000. Understanding this calculation is essential in real estate, as the NOI is a critical indicator of a property's financial performance, reflecting the income it generates after operating expenses are deducted but before financing costs and taxes.

The correct answer directly aligns with the calculated NOI, reinforcing the formula’s application in determining a property’s income potential based on its value and the associated cap rate.