Property Valuation
In New Mexico, the 'band of investment' technique is used to derive a capitalization rate by:
AAveraging multiple sales of similar properties
BWeighting the required returns on the mortgage (debt) portion and equity portion of a property's value✓ Correct
CApplying a standard national cap rate to all properties
DUsing the property's historical income divided by its purchase price
Explanation
The band of investment technique derives the overall cap rate by combining the mortgage constant (lender's return) weighted by the loan-to-value ratio with the equity dividend rate weighted by the equity ratio, reflecting how most income properties are financed.
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