Property Valuation
The formula for the income capitalization approach is:
AValue = NOI × Cap Rate
BValue = NOI ÷ Cap Rate✓ Correct
CValue = GRM × Monthly Rent
DValue = Cost − Depreciation
Explanation
Value = Net Operating Income (NOI) ÷ Capitalization Rate. For example, a property with $60,000 NOI and a 6% cap rate would be valued at $60,000 ÷ 0.06 = $1,000,000.
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