Property Valuation
The capitalization rate (cap rate) is calculated by dividing:
AGross rent by purchase price
BNet operating income (NOI) by purchase price (value)✓ Correct
CNet income by gross income
DVacancy rate by potential gross income
Explanation
Cap Rate = NOI ÷ Value. Example: NOI of $24,000 ÷ $300,000 value = 0.08 or 8% cap rate. Rearranged: Value = NOI ÷ Cap Rate.
Related Arkansas Property Valuation Questions
- Direct capitalization in the income approach converts income into value by:
- The principle of 'substitution' in real estate appraisal states that:
- Depreciation in appraisal refers to:
- An appraisal is different from a competitive market analysis (CMA) primarily because:
- The cost approach to value is MOST appropriate for appraising:
- A comparative market analysis (CMA) is performed by:
- Which appraisal approach estimates value by analyzing recent sales of comparable properties?
- The principle of HIGHEST AND BEST USE means the use that is:
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