An investment property generates $60,000 in annual net operating income. If the cap rate is 8%, the estimated property value is:
Correct Answer
C) $750,000
Property value = NOI ÷ Cap Rate = $60,000 ÷ 0.08 = $750,000. This is the fundamental formula of the income approach. A lower cap rate results in a higher property value.
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Related Topics & Key Terms
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Related Concepts
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
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- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
- → The sales comparison approach to appraisal is most appropriate for which type of property?
- → Which of the following correctly lists the three types of depreciation recognized in real estate appraisal?
- → The sales comparison approach to appraisal is most commonly used for which type of property?
- → Which four tests must a use satisfy to qualify as the highest and best use of a property?
- → Three depreciation:
- → Cap rate:
- → Which formula best represents the cost approach to appraisal?
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