The capitalization rate (cap rate) used in the income approach to appraisal is calculated as:
Correct Answer
C) Net operating income divided by property value
The capitalization rate (cap rate) equals Net Operating Income (NOI) divided by Property Value (Cap Rate = NOI ÷ Value). Rearranged, Value = NOI ÷ Cap Rate. This formula is central to the income approach and is commonly used to appraise income-producing properties such as apartment buildings and commercial real estate throughout Alaska.
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The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
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.
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- → The income approach to appraisal is most commonly used for which type of property?
- → External obsolescence in Oklahoma:
- → Which of the following correctly lists the three types of depreciation recognized in real estate appraisal?
- → The sales comparison approach to appraisal is most appropriate for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → 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:
- → A Comparative Market Analysis (CMA) is best described as which of the following?
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