Property Valuation
What is the 'principle of competition' and how does it affect Oregon real estate investment decisions?
ACompetition between appraisers lowers appraisal fees
BWhen a property generates above-market returns, competition from other investors will drive prices up and reduce yields until profits normalize✓ Correct
CCompetition between buyers always increases property values
DThe principle that property values in Oregon compete with other states
Explanation
The principle of competition states that when properties generate excess (above-normal) profits, competition stimulates more development and investment, ultimately reducing those profits to normal levels. For Oregon investors, if a particular market sector or neighborhood generates high yields, those yields will attract competition and new supply, eventually stabilizing returns.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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