Property Valuation
The capitalization rate (cap rate) is used in the income approach to value and is calculated as:
AGross income divided by operating expenses
BNet operating income divided by property value✓ Correct
CProperty value multiplied by the mortgage rate
DEffective gross income divided by the loan balance
Explanation
Cap Rate = Net Operating Income (NOI) ÷ Property Value. It represents the expected rate of return on a real estate investment and is used to convert income into value.
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