Property Valuation
In the income approach, a low capitalization rate indicates that a property:
AHas high risk and low value
BHas lower risk and higher value relative to its income✓ Correct
CIs overvalued compared to the market
DGenerates insufficient income to be appraised
Explanation
A lower cap rate indicates that investors perceive lower risk and are willing to pay more per dollar of income. Lower risk = higher value = lower cap rate.
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