On practice exam 2 afternoon section, volume 2, question 204 of schweser multiple NOI and transaction prices are given. Then an NOI is given for a property to be valued. They ask what is the cap rate and the value of the building. Does anyone know if you are just supposed to take the closest NOI given and use that cap rate. Also if you use NOI given/Cap rate the answer doesnt make sense. Not sure if anyone can explain this question. Thanks
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The market cap rate = Benchmark NOI/benchmark transaction price, by “benchmark” being understood a recently sold similar building, or an average of comparable properties. If you’re given several similar properties, take the average (NOI and transaction price), not the closest in value to your building’s NOI Appraisal price of of your building=NOI of the building/market cap rate
Market capitalization rate = discount rate +/- depreciatin/appreciation of the property