Property Valuation
What is the 'capitalization rate' primarily influenced by in Idaho's market?
AProperty tax rates
BInvestor expectations about risk, return, and market conditions✓ Correct
CThe age of the building
DThe local building permit process
Explanation
Cap rates are primarily influenced by market conditions — investor expectations about risk, required returns, supply and demand for investment properties, interest rates, and economic outlook. Higher risk properties have higher cap rates.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market 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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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