Property Valuation
In South Dakota, which of the following would cause the cap rate for an investment property to INCREASE?
ADecreased risk perception in the market
BIncreased risk perception or rising interest rates in the market✓ Correct
CStrong tenant credit quality
DLong-term leases with creditworthy tenants
Explanation
Cap rates increase when investors perceive higher risk or when interest rates rise, because investors demand a higher return for the perceived risk. Higher cap rates result in lower property values at the same NOI.
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