A rental property has a return rate of 8% with a monthly net rental of $600. What is the market value of the property?

To determine the market value of the property based on the given return rate and net rental income, you can use the formula for calculating market value based on capitalization rate. The formula is:

Market Value = Net Annual Income / Capitalization Rate

In this case, the net rental income is $600 per month. To find the annual income, you multiply the monthly income by 12:

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

The return rate, or capitalization rate, is given as 8%. To calculate the market value, you convert the percentage into a decimal for the formula:

Capitalization Rate = 8% = 0.08

Now, you can plug the values into the formula:

Market Value = $7,200 / 0.08

Calculating this gives:

Market Value = $90,000

Therefore, the market value of the property is indeed $90,000, confirming that this is the correct answer. This value reflects the relationship between the net income the property generates and the return investors would require based on the risk associated with that investment.