Property Valuation
An appraiser uses the 'income capitalization approach' and determines the capitalization rate by the 'band of investment method.' This method is based on:
AOnly the equity dividend rate
BCombining the mortgage interest rate and equity return rate weighted by their respective portions of the value✓ Correct
COnly the going-in cap rate from sales
DThe prime rate only
Explanation
The band of investment method calculates the overall cap rate as a weighted combination of the mortgage constant (for the debt portion) and the equity dividend rate (for the equity portion).
Related Virginia Property Valuation Questions
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