Can use income capitalization… - Posted by Rolfe Kurtyka
Posted by Rolfe Kurtyka on January 16, 2001 at 23:07:45:
Typically, when considering 1-4 unit residential or small commercial buildins, a comparitive market analysis holds sway. For larger multi-unit residential or commercial properties, market derived cap rates are commonly used to estimate value, or, if an investor desires a certain cap rate, to determine what offer an investor might present for a given property. To determine cap rates, investors, bankers, lenders, appraisers, and brokers compare historical investment property incomes (NOI)to known market values. The capitalization Rate = NOI divided by Value. Once the rate for a particular market and property type is known, that same rate can be applied to a similar property’s NOI to estimate value (Value = NOI / Cap Rate).
Good Luck! Rolfe