Property Valuation
In the income approach to value, the capitalization rate (cap rate) is calculated as:
ANOI divided by the property value✓ Correct
BGross income divided by the property value
CProperty value divided by NOI
DOperating expenses divided by gross income
Explanation
Cap Rate = Net Operating Income (NOI) ÷ Property Value. Alternatively, Value = NOI ÷ Cap Rate. A higher cap rate indicates a higher return but may also signal higher risk or a declining market.
Related Colorado Property Valuation Questions
- In a cost approach appraisal, the 'reproduction cost' differs from 'replacement cost' in that:
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- An appraiser uses a cap rate of 6.5% and an NOI of $52,000 to value a Colorado office building. What is the indicated value?
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