Property Valuation
The 'band of investment' method of deriving a capitalization rate considers:
AOnly the equity investor's required return
BBoth the mortgage component (lender's return) and equity component (investor's return) of the typical investment✓ Correct
COnly comparable sales cap rates
DThe property's gross rent multiplier
Explanation
The band of investment method calculates a cap rate as a weighted average of the mortgage constant (lender's component) and the equity capitalization rate (investor's required return), weighted by the typical loan-to-value ratio.
Related Arkansas Property Valuation Questions
- When appraising a historic property in Arkansas, the appraiser must consider:
- Which type of depreciation is caused by factors OUTSIDE the property, such as a nearby highway being constructed?
- The cost of an improvement refers to:
- An appraisal 'adjustment for time' is needed when comparable sales:
- If a home in a neighborhood of $200,000 houses is improved with a $100,000 addition, its value will likely:
- Accrued depreciation in the cost approach equals:
- Depreciation in appraisal refers to:
- In Arkansas, appraisers are licensed and regulated by:
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