Property Management
The capitalization rate used in income property management tells an investor:
AThe property's appreciation rate
BThe expected rate of return on the property based on its NOI relative to its value✓ Correct
CThe mortgage rate the investor should seek
DThe ratio of management fees to gross income
Explanation
The cap rate (NOI / Property Value) tells an investor the unleveraged rate of return the property is expected to generate. Higher cap rates indicate higher returns but often more risk; lower cap rates reflect lower risk and/or higher-priced markets like Salt Lake City.
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