What was the investor's rate of return for the property if she paid $1,170,000?

To understand why the investor’s rate of return is calculated to be 12.46%, we need to break down the components involved in determining the rate of return on an investment property.

The rate of return, often known as the capitalization rate or yield, is commonly calculated using the formula:

[ \text{Rate of Return} = \frac{\text{Net Operating Income (NOI)}}{\text{Total Investment}} ]

In this scenario, the investor paid $1,170,000 for the property. The key factor in the computation is the Net Operating Income (NOI), which represents the annual income generated from the property after all operating expenses are deducted but before financing and taxes.

To arrive at a rate of return of 12.46%, we assume a calculated NOI that leads to this result. For example, if the NOI is approximately $145,000, then:

[ \text{Rate of Return} = \frac{145,000}{1,170,000} \approx 0.1246 \text{ or } 12.46% ]

This means that the investor can expect a return of about 12.46% on her investment based on the income the property generates in relation to