Valuation & AppraisalQuestion 90 of 120
In the income approach, the relationship used to convert net operating income into value is the:
a.Gross rent multiplier only
b.Loan-to-value ratio
c.Assessment ratio
d.Capitalization rate
Explanation
The income approach converts a property's net operating income (NOI) into value using a capitalization (cap) rate, where value equals NOI divided by the cap rate. It is used mainly for income-producing properties. A higher cap rate generally indicates higher risk and lower value for the same income.
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