Question

An increased demand for commercial properties in a specific location should lower the cap rates for these properties. True or False

If you were to use the average property cap rate for a neighborhood as the discount rate when trying to find the present value of a specific property’s net operating income, then properties in the neighborhood with higher net operating incomes would have lower valuations. True or False

You should never buy an income producing property that has a cap rate that is low relative to other properties in the neighborhood. True or False

Answer 1

Ans

1 false. It will increase because income from property will rise say E. G from rent due to higher demand

2 True. Because greater the denominator smaller the result

3 false. Budget also matters. We would like to purchase best asset but may not have enough money