Property Valuation
A capitalization rate (cap rate) is used to:
ACalculate the mortgage payment on a property
BConvert a property's net operating income into an estimated value✓ Correct
CDetermine the replacement cost of a building
DMeasure the gross rent multiplier
Explanation
The cap rate converts a property's NOI into an estimated market value. Value = NOI / Cap Rate. Appraisers in New Mexico use standardized methods to estimate property value for lending and sales.. The correct answer is Convert a property's net operating income into an estimated value.
Related New Mexico Property Valuation Questions
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