Property Valuation
The NJ property tax assessment process involves determining the ratio of assessed value to market value, known as the:
ACap rate
BCommon level range or assessment ratio✓ Correct
CGross rent multiplier
DDebt service coverage ratio
Explanation
New Jersey calculates an average ratio of assessed values to true market values for each municipality (the common level range/average ratio). Tax appeals are judged against whether the assessment falls within the common level range.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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