Property Valuation
An appraiser valuing a North Dakota commercial building uses a 'direct capitalization' method. This means:
ADiscounting multiple years of cash flows
BDividing the stabilized first-year NOI by the appropriate cap rate to estimate value✓ Correct
CUsing the cost approach to determine value
DAveraging the last 5 years of income
Explanation
Direct capitalization converts a single year's stabilized net operating income into value by dividing by the appropriate cap rate. It is simpler than discounted cash flow (DCF) analysis and is commonly used for stabilized income-producing properties.
Related North Dakota Property Valuation Questions
- An appraiser adjusting comparable sales for North Dakota property condition differences uses the principle that:
- Which North Dakota principle states that value is influenced by the returns expected from surrounding properties?
- In North Dakota, when an appraiser uses an automated valuation model (AVM) to assist in valuing a property, USPAP requires the appraiser to:
- In a North Dakota appraisal, the 'effective age' of a building may differ from its actual age because:
- When a North Dakota property's income is capitalized at a lower cap rate, the resulting value is:
- In North Dakota, what is the difference between 'list price' and 'sold price'?
- Which factor would MOST LIKELY cause a property's value to DECREASE?
- An appraiser in North Dakota performing a 'highest and best use' analysis must consider four criteria. Which of the following is NOT one of them?
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