Property Valuation
A NC property's capitalization rate is determined primarily by:
AThe owner's desired return
BMarket expectations of return for similar investment properties in the local market✓ Correct
CThe mortgage interest rate
DThe county property tax rate
Explanation
Cap rates are determined by the market — they reflect the return investors in a specific market expect for a given property type and risk level, derived from analysis of comparable sales.
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- A property in Raleigh, NC has a net operating income of $48,000 and the market capitalization rate is 8%. Its estimated value using the income approach is:Property Valuation
- When a NC appraiser uses a market extraction method to determine a capitalization rate, they analyze:Property Valuation
- In the sales comparison approach, a positive adjustment to a comparable sale means:Property Valuation
- An adjustment in the sales comparison approach for a feature the subject property HAS but the comparable does NOT have requires the appraiser to:Property Valuation
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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
Listing AgreementA contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.
Math Concepts
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