Property Valuation
Direct capitalization in the income approach converts income into value by:
AMultiplying NOI by the economic life of the property
BDividing NOI by the capitalization rate✓ Correct
CAdding NOI to land value
DSubtracting vacancy from potential gross income
Explanation
Direct capitalization: Value = NOI ÷ Cap Rate. This single-year income approach capitalizes stabilized NOI directly into a value estimate using a market-derived capitalization rate.
Related Arkansas Property Valuation Questions
- If a home in a neighborhood of $200,000 houses is improved with a $100,000 addition, its value will likely:
- What is the purpose of a Broker Price Opinion (BPO)?
- Which type of depreciation is caused by factors OUTSIDE the property, such as a nearby highway being constructed?
- Which appraisal approach estimates value by analyzing recent sales of comparable properties?
- What does 'highest and best use' mean in appraisal?
- In an appraisal, an adjustment for a comparable sale that is SUPERIOR to the subject property results in:
- Accrued depreciation in the cost approach equals:
- 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 →