Property Valuation
What is capitalization rate (cap rate) used for in Hawaii real estate appraisal?
AA. To determine the maximum loan amount
BB. To convert net operating income into an estimate of property value✓ Correct
CC. To calculate depreciation for tax purposes
DD. To measure cost per square foot of construction
Explanation
Cap rate is used in the income approach: Value = Net Operating Income / Cap Rate. It converts a property's income stream into an estimated market value.
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