Property Valuation
The income approach formula Value = NOI ÷ Cap Rate is known as:
AThe sales comparison formula
BDirect capitalization✓ Correct
CGross rent multiplication
DDiscounted cash flow analysis
Explanation
Direct capitalization converts a single year's net operating income (NOI) into a value estimate by dividing by the capitalization rate (V = NOI ÷ R). It is the most common income approach method for stable, income-producing properties.
Related Florida Property Valuation Questions
- The income approach to value is most commonly used for which type of Florida property?
- The 'gross rent multiplier' (GRM) is calculated by:
- Under FIRREA (Financial Institutions Reform, Recovery and Enforcement Act), licensed appraisers in Florida who perform federally related transactions must be:
- In Florida, an appraisal performed for a federally related transaction must be conducted by a:
- The 'gross rent multiplier' (GRM) method is best used for:
- The 'plottage' principle in real estate valuation means that:
- A Florida appraiser is working on a commercial office building. Which valuation approach is likely to be given the most weight?
- In Florida, a 'desk review' appraisal involves:
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