Property Valuation
In the income approach, capitalization rate (cap rate) is determined by:
ADividing NOI by sale price of comparable properties✓ Correct
BMultiplying gross rent by a market factor
CSubtracting depreciation from replacement cost
DAdding all expenses to NOI
Explanation
Cap rate is derived by dividing the net operating income of recently sold comparable properties by their sale prices, reflecting the market's return expectations.
Related Kentucky Property Valuation Questions
- The principle of substitution states that a buyer will pay no more for a property than the cost of:
- When a Kentucky appraiser's value conclusion is significantly lower than the contract price, the lender's underwriter will likely:
- An appraiser applies a negative adjustment to a comparable sale that has a feature the subject property lacks. For example, the comparable has a pool and the subject does not. The adjustment is made to:
- In the cost approach, the term 'effective age' refers to:
- External obsolescence (also called economic obsolescence) in a Kentucky property may be caused by:
- The principle of anticipation in Kentucky property valuation holds that value is based on:
- In the income approach, potential gross income (PGI) is the income a Kentucky property would generate if:
- The 'highest and best use' principle in Kentucky means the appraiser values a property based on its:
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