What is the property value if the effective gross income is $96,000 and operating expenses are $45,000 with a capitalization rate of 9%?

To determine the property value using the effective gross income, operating expenses, and capitalization rate, you first need to calculate the net operating income (NOI). The NOI is found by subtracting the operating expenses from the effective gross income.

Starting with the effective gross income of $96,000 and subtracting the operating expenses of $45,000, we have:

Net Operating Income (NOI) = Effective Gross Income - Operating Expenses
NOI = $96,000 - $45,000
NOI = $51,000.

Next, to find the property value, you can use the capitalization rate formula:

Property Value = Net Operating Income / Capitalization Rate.

Given the capitalization rate of 9% (or 0.09 in decimal form), the calculation becomes:

Property Value = $51,000 / 0.09.
Property Value = $566,667.

This value represents the amount that an investor would be willing to pay for the property, based on the income it generates and the risk associated with that income (as indicated by the capitalization rate). The calculations correctly lead to the property value of $566,667, which aligns with the choice provided.