When using the capitalisation approach for an investment property valued at $800,000 with an annual rental income of $48,000, what is the capitalisation rate?
Correct Answer
B) 6.0%
The capitalisation rate is calculated by dividing annual rental income by property value: $48,000 ÷ $800,000 = 0.06 or 6.0%. This rate represents the annual return on investment and is used to assess the property's income-generating potential.
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When using the capitalisation approach for an investment property generating $52,000 annual rental income, what would be the estimated value using a capitalisation rate of 6.5%?
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