Property Valuation
In New Mexico, which factor would most likely INCREASE the cap rate (and therefore DECREASE the property value) for an income property?
AIncreasing market rents
BHigher perceived investment risk due to poor location or declining market✓ Correct
CBelow-market financing available
DHigh occupancy rates
Explanation
Higher perceived risk demands a higher required return (higher cap rate). A declining market or poor location increases risk, so investors require more return, which translates to a lower property value (NOI / higher cap rate).
Related New Mexico Property Valuation Questions
- In New Mexico, which factor would an appraiser NOT typically consider when adjusting comparable sales?
- Depreciation in the cost approach to value is described as:
- In the cost approach to value, the appraiser estimates:
- In New Mexico, which of the following would be considered a 'trade fixture' and remain the tenant's property upon lease expiration?
- Functional obsolescence in a New Mexico home would be best described as:
- In the income approach, 'effective gross income' is calculated as:
- External obsolescence that reduces a New Mexico property's value would be exemplified by:
- A capitalization rate (cap rate) is used to:
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