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
D) 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.
Why This Is the Correct Answer
The rate is income divided by value: $48,000 divided by $800,000 is 0.06, or 6.0%.
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