Property Valuation
A direct capitalization approach to value uses which formula?
AValue = NOI × Cap Rate
BValue = NOI ÷ Cap Rate✓ Correct
CValue = GRM × Cap Rate
DValue = Gross Income ÷ Expenses
Explanation
Direct capitalization: Value = NOI ÷ Cap Rate. For example, $50,000 NOI ÷ 0.08 cap rate = $625,000. Appraisers in New Jersey use standardized methods to estimate property value for lending and sales.. The correct answer is Value = NOI ÷ Cap Rate.
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