Property Valuation
In Massachusetts real estate, a 'capitalization rate' for residential income property differs from a commercial capitalization rate because:
AResidential cap rates are always lower than commercial cap rates
BResidential cap rates tend to be lower in premium markets (like Greater Boston) reflecting investor acceptance of lower yields for stable assets✓ Correct
CCommercial cap rates are always higher than residential cap rates nationally
DResidential and commercial cap rates are identical
Explanation
In premium markets like Greater Boston, residential income property cap rates are often compressed (lower) because investors accept lower yields for perceived stability, strong demand, and appreciation potential—despite the lower income return.
Related Massachusetts Property Valuation Questions
- A Massachusetts commercial tenant pays rent of $20 per square foot for a 5,000 sf space. Annual rent is:
- A Massachusetts appraiser identifies a comparable sale that closed 18 months ago. The appraiser should:
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- The principle of substitution states that:
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- The income approach formula is:
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