Property Valuation
What is a capitalization rate (cap rate) and how is it determined?
AA rate set by the government
BThe rate at which income is converted to value, derived from market analysis of comparable sales✓ Correct
CThe mortgage interest rate
DThe property tax rate
Explanation
A cap rate is derived from market analysis by dividing the NOI of comparable sales by their sale prices. It reflects investor return expectations and market conditions. Cap rates vary by property type, location, and market conditions.
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