Property Valuation
Capitalization rate (cap rate) is defined as:
ANet Operating Income divided by sale price (or value)✓ Correct
BGross income multiplied by a market factor
CLoan amount divided by property value
DAnnual debt service divided by NOI
Explanation
Cap Rate = Net Operating Income ÷ Value (or Sale Price). It represents the rate of return on an income-producing property, ignoring financing. Investors use it to compare property values and risk.
Related Arkansas Property Valuation Questions
- The income approach to value is most commonly used to appraise:
- Regression is an appraisal principle that states:
- The cost approach to value is most reliable for:
- Which of the following is an example of a physical characteristic that an appraiser would adjust for in the sales comparison approach?
- External (economic) obsolescence differs from other forms of depreciation because it is:
- Contract rent below market rent creates:
- A property's Gross Rent Multiplier (GRM) is calculated by dividing the:
- The cost approach to value is MOST appropriate for appraising:
Practice More Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →