Property Valuation
When an Oklahoma commercial appraiser uses the 'band of investment' technique to derive a capitalization rate, they are:
AInvesting in certificates of deposit for the client
BDeveloping a cap rate that reflects the weighted average return requirements of both debt (mortgage) and equity investors, based on their respective proportions and required rates of return✓ Correct
CLooking at bank investment yields only
DCalculating the investment return for the appraiser's own portfolio
Explanation
The band of investment method derives a cap rate by weighting the mortgage constant (debt return requirement) by the LTV ratio and the equity dividend rate by the equity ratio. The result reflects the overall return requirement of the combined debt and equity investors.
Related Oklahoma Property Valuation Questions
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