What is an underlying componentQuestion39. What is an underlying component that contributes to an investor's decision as to what capitalization rate is appropriate for a particular property...? The amount of real estate taxes paid on the property The amount of expenses a property will demand ...
39. What is an underlying component that contributes to an investor's decision
as to what capitalization rate is appropriate for a particular property...? The
amount of real estate taxes paid on the property The amount of expenses a
property will demand The amount of gross potential income a property can earn
The amount of risk associated with the deal
Answer & Explanation
The correct answer is: The amount of risk associated with the deal
Explanation:
1. Capitalization Rate (Cap Rate):
o The cap rate is a measure used in real estate to evaluate the
potential return on an investment property. It is calculated by
dividing the net operating income (NOI) of a property by its
current market value or purchase price.
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