Property Valuation
The 'band of investment' technique in the income approach estimates a cap rate by:
AUsing only equity returns
BWeighing the mortgage rate and equity return in proportion to their contribution to the total investment✓ Correct
CComparing similar property cap rates only
DUsing the risk-free rate plus a premium
Explanation
The band of investment technique calculates the overall cap rate by weighting the mortgage constant (loan portion) and equity capitalization rate (equity portion) in proportion to their respective shares of the total investment.
Related Georgia Property Valuation Questions
- An appraiser uses a 'bracketing' technique in the sales comparison approach by:
- A capitalization rate for an income property is influenced by all of the following EXCEPT:
- When a comparable sale sold for more than the subject property, the appraiser makes a:
- Appraisers use 'paired sales analysis' to:
- The 'cost to cure' method of depreciation estimates functional obsolescence by calculating:
- A Georgia commercial property has potential gross income of $120,000, vacancy and credit loss of 8%, and operating expenses of $40,000. Using the income approach with a cap rate of 9%, what is the estimated value?
- The overall capitalization rate (OAR) for an income property reflects:
- An appraiser determines that a property's contributory value of a swimming pool is $15,000. This means:
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