What is the relationship between cap rates and interest rates in Delaware commercial real estate?
Why Cap rates generally increase when interest rates rise, as the return required by investors increases to stay competitive with debt costs Is Correct
Answer B: Cap rates generally increase when interest rates rise, as the return required by investors increases to stay competitive with debt costs
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
People Also Study
Related Delaware Questions
- A Delaware home purchase contract includes a mortgage contingency requiring the buyer to obtain financing at 7% or lower. If rates rise to 7.5% and the buyer cannot qualify, what happens?Contracts
- What is a 'brokerage relationship' disclosure required in Delaware?Delaware License Law
- A Delaware property's NOI is $31,500 with a cap rate of 7%. A buyer's required return is 7.5%. By how much will the buyer discount the value below the seller's asking price?Real Estate Math
- A wraparound mortgage involves:Finance
- What is 'regression to the mean' in Delaware property values?Property Valuation
- A Delaware commercial property has a net operating income (NOI) of $90,000 and is purchased for $1,125,000. What is the capitalization rate?Property Valuation
- What is an 'as stabilized' value in Delaware commercial real estate appraisal?Property Valuation
- What is 'floor area ratio' (FAR) and how does it relate to Delaware commercial property value?Property Valuation
Key Terms to Know
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
Study This Topic
Practice More Delaware Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Delaware Quiz →