Property Valuation
The income approach uses a direct capitalization formula: V = I / R. In this formula, 'R' represents:
ARevenue generated by the property
BThe capitalization rate✓ Correct
CThe rental income rate
DThe rate of return on the investment
Explanation
In the direct capitalization formula V = I/R, V = Value, I = Net Operating Income (NOI), and R = Capitalization Rate. This formula expresses the relationship between income and value.
Related Tennessee Property Valuation Questions
- In Tennessee, a 'broker price opinion' (BPO) is:
- An appraiser's 'scope of work' document must describe:
- The Tennessee Certified Residential Appraiser classification allows appraisers to appraise:
- An appraisal is defined as:
- When appraising new construction, the cost approach is often most appropriate because:
- An appraisal that values a property under the assumption that it will continue its current use rather than be converted to its highest and best use is known as a:
- A site that is physically and legally unsuitable for the proposed highest and best use is said to lack:
- In the income approach, effective gross income (EGI) is calculated as:
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