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Estimation Of The Capitalization Rate In Real Estate Property Analysis And Appraisal

Author

Listed:
  • Ion Anghel
  • Raluca Florentina Cretu

    (The Bucharest University of Economic Studies Faculty Accounting and Management Information System)

Abstract

The appraisal profession and the appraisal process look different than a decade ago. Many changes have come in reaction to problems in property markets others as a result of the development of the knowledge of the real estate appraisal discipline. The real estate crisis creates a debate regarding the quality of the property valuation. One of the most important development was realised in the income approach. The rationale of the income approach is straightforward: the property value is a function of the income expected to produce and the risk behind that income. Where capitalization rate is any percentage use for transforming income into value or the rate of return which convert the annual income from an investment into the value of that investment. We will show below a synthetic presentation of the main methods for calculating the capitalization rate.

Suggested Citation

  • Ion Anghel & Raluca Florentina Cretu, 2012. "Estimation Of The Capitalization Rate In Real Estate Property Analysis And Appraisal," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(40), pages 5-14.
    • Handle: RePEc:aio:aucsse:v:2:y:2012:i:40:p:5-14
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    More about this item

    Keywords

    real estate; analysis; estimation; investment; the property valuation;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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