Property Valuation
In South Dakota, when using the income approach for a commercial property, the appraiser derives a cap rate by:
AUsing IRS depreciation schedules for the property type
BAnalyzing recent sales of comparable income properties and calculating NOI divided by sale price for each✓ Correct
CEstimating future income growth and discounting to present value
DUsing the prime interest rate plus a risk premium
Explanation
Cap rates are derived from the market by analyzing comparable sales: cap rate = NOI ÷ sale price for each comparable. Appraisers analyze multiple comparable sales to derive a market cap rate range, then apply the appropriate rate to the subject's NOI to estimate value.
Related South Dakota Property Valuation Questions
- In South Dakota, which principle holds that the value of a property depends partly on the expected future income it will produce?
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