Property Valuation
Capitalization rate (cap rate) is calculated as:
AGross rent divided by purchase price
BNet operating income divided by property value✓ Correct
CProperty value divided by net operating income
DGross income minus vacancy rate
Explanation
Cap rate = Net Operating Income ÷ Property Value (or Sale Price). A higher cap rate suggests higher risk or lower value relative to income. Cap rates are used to estimate value: Value = NOI ÷ Cap Rate.
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