Worked example
A home sells for $750,250 and the buyer takes out a new loan, so nothing is excluded.
- $750,250 ÷ $500 = 1,500.5, which rounds up to 1,501 units.
- 1,501 × $0.55 = $825.55 county tax.
- In a general law city, half of that is the city’s share and the county credits it, so the total is unchanged.
Cap rate in one line
| Net operating income | Price | Cap rate |
|---|---|---|
| $40,000 | $800,000 | 5.0% |
| $60,000 | $800,000 | 7.5% |
| $60,000 | $1,000,000 | 6.0% |
Cap rate = NOI ÷ value, so value = NOI ÷ cap rate. A lower cap rate means a higher price for the same income. Exam questions often give two of the three and ask for the third.
Try 3 real estate exam practice questions
An appraiser is preparing a report on a single-family home and selects three comparable sales from the same neighborhood within the past six months. Which valuation method is the appraiser primarily using?
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B. Sales comparison approach The sales comparison approach estimates value by comparing the subject property to recently sold comparable properties. This is the most common approach for residential properties. The cost approach estimates replacement cost, the income approach is used for income-producing properties, and GRM is a variant of the income approach.
A buyer submits an offer on a home with a home-inspection contingency. Before the seller accepts, the buyer learns the seller has already accepted a competing offer. What is the status of the first offer?
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C. It remains a valid, pending offer until revoked or accepted. An offer stays open and valid until the offeree rejects it, revokes it, or it expires. A competing offer does not extinguish the first one; only the seller can revoke or accept. The contingency does not void the offer, and a counteroffer requires affirmative action by the offeree.
A tenant installs a commercial-grade oven in a rented bakery. Upon lease termination, the tenant removes the oven, leaving minor wall damage. How is the oven classified?
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C. A trade fixture removable by the tenant. A trade fixture is personal property installed by a tenant for business purposes and is removable by the tenant at lease termination. It does not become real property despite attachment. Emblements are cultivated crops, and a standard fixture would remain with the property.
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Common questions
Counties charge $0.55 for each $500 of value or fraction of $500, which is $1.10 per $1,000. Many charter cities add their own tax on top at their own rate.
No. Under Revenue and Taxation Code section 11911 the county tax is figured on the value exclusive of any lien or encumbrance that remains on the property at the sale, so a loan the buyer assumes is subtracted. A new loan the buyer takes out is not.
The law does not say. Custom varies by county and city, and the purchase contract decides. In many areas the seller pays the county tax and the parties negotiate any city tax.
A general law city may levy half the county rate, and that amount is credited against the county tax, so the total stays $1.10 per $1,000. Charter cities can set their own rates, often much higher, and some have tiers by price. Check the city's current rate before closing.
Divide the property's net operating income (rent and other income minus operating expenses, before loan payments) by its price or value. $40,000 of NOI on an $800,000 building is a 5% cap rate.
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Sources, checked 2026-10-29: California Revenue and Taxation Code §11911 (county rate) and §11931 (city rate and credit); Los Angeles County Registrar-Recorder, documentary transfer taxes. City rates change; confirm with the city or county recorder. QuizCram is not affiliated with the agencies or standards bodies named here.
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