A property had a net operating income of $3,430. If the property had a value of $22,000, what was the rate of return of this property?

To determine the rate of return on the property, you would use the formula for capitalization rate, which is calculated by dividing the net operating income (NOI) by the property value. In this case, the net operating income is $3,430 and the property value is $22,000.

The calculation is as follows:

Rate of Return (Cap Rate) = Net Operating Income / Property Value

Substituting the values:

Rate of Return = $3,430 / $22,000

When you perform this division, you get approximately 0.15682. To express this as a percentage, you multiply by 100, resulting in about 15.68%.

Therefore, rounding to two decimal places gives a rate of return of about 15.59%, which corresponds to the correct answer.

This value reflects the return an investor would expect from this property relative to its value, providing an essential metric for assessing investment performance. A higher rate of return generally indicates a more lucrative investment opportunity, assuming the associated risks are manageable.