Property Valuation
An appraiser using the income approach calculates a capitalization rate by dividing:
ASales price by gross rent
BNet operating income by sales price of comparable properties✓ Correct
CVacancy rate by potential gross income
DEffective gross income by the number of units
Explanation
The capitalization (cap) rate is derived from comparable sales: Cap Rate = NOI / Sales Price of comparable property. This market-derived rate is then applied to the subject property's NOI to estimate value.
Related New Mexico Property Valuation Questions
- An appraiser is estimating the value of a single-family home. Which approach to value would they most likely use as the primary method?
- In New Mexico, which of the following would be considered a 'super-adequate' feature that may contribute to functional obsolescence?
- The capitalization rate (cap rate) used in the income approach reflects:
- A New Mexico appraiser uses the 'age-life method' to estimate depreciation. If a building has an effective age of 15 years and a total economic life of 50 years, the depreciation percentage is:
- In New Mexico, the market value of a property may differ significantly from its assessed value because:
- In New Mexico, property that has been 'condemned' by the government has been:
- A comparable sale sold for $250,000 and has a feature the subject property lacks. The appraiser adjusts the comparable by -$5,000. This means:
- A capitalization rate (cap rate) is used to:
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