Property Valuation
What is a capitalization rate (cap rate)?
AThe interest rate on a mortgage
BThe rate of return an investor expects on an income property✓ Correct
CThe property tax rate
DThe commission rate paid to an agent
Explanation
The cap rate is the ratio of a property's Net Operating Income (NOI) to its value/price. Cap Rate = NOI ÷ Value. It represents the expected rate of return on an investment property.
Related California Property Valuation Questions
- An appraiser conducting 'paired sales analysis' is attempting to:
- The principle of 'anticipation' in real estate valuation states that:
- What is 'depreciation' in real estate appraisal?
- What is the cost approach to value?
- When using the age-life method to estimate accrued depreciation, the depreciation percentage is calculated by dividing effective age by:
- Which appraisal approach is most appropriate for valuing a special-purpose property such as a church or school with few comparable sales?
- Under USPAP (Uniform Standards of Professional Appraisal Practice), a licensed appraiser must retain the workfile for a completed appraisal for a minimum of:
- What are the three standard approaches to property valuation?
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