Property Management
What is 'capitalization rate' as used by Rhode Island property managers when advising investor clients?
AThe annual interest rate on a mortgage
BThe rate at which future income is converted to present value; used to estimate the value of an income-producing property✓ Correct
CThe percentage of income paid in property taxes
DThe vacancy rate for a managed property
Explanation
The capitalization rate (cap rate) expresses the relationship between a property's NOI and its value (NOI / Value = Cap Rate). It is used to estimate property value using the income approach and to compare investment properties.
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