Property Valuation
A NH appraiser uses the 'direct capitalization' method for a commercial property. The steps are:
ACalculate PGI, add expenses, divide by cap rate
BEstimate NOI, then divide by the market-derived cap rate to get value✓ Correct
CSubtract mortgage payments from gross income to get value
DMultiply assessed value by the cap rate
Explanation
Direct capitalization: Step 1 – Estimate Net Operating Income (NOI) = Effective Gross Income − Operating Expenses. Step 2 – Divide NOI by the market-derived capitalization rate. Value = NOI / Cap Rate. This converts the property's income into a value estimate.
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