Property Management
What is a CAP (capitalization rate) used for in evaluating Nevada rental properties as investments?
ATo calculate the maximum allowable rent increase
BTo estimate the market value of an income property by dividing the NOI by the prevailing market cap rate✓ Correct
CTo determine the maximum security deposit a landlord may charge
DTo set the management fee percentage
Explanation
The capitalization rate (cap rate) converts a property's NOI into an estimated market value: Value = NOI / Cap Rate. Investors use prevailing market cap rates in Nevada (sourced from comparable sales) to quickly evaluate whether a rental property is priced appropriately.
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