Property Valuation
When appraising a Washington property using the direct capitalization method, the cap rate is applied to which figure?
APotential gross income (PGI)
BEffective gross income (EGI)
CNet operating income (NOI)✓ Correct
DCash flow after debt service
Explanation
Direct capitalization applies the cap rate to the Net Operating Income (NOI) — income after vacancy/collection losses and operating expenses, but before debt service. Value = NOI ÷ Cap Rate.
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