What key pieces of information does an appraiser need to determine a property's capitalization rate?

To determine a property's capitalization rate, an appraiser primarily focuses on the property's net income and its value. The capitalization rate, often expressed as a percentage, is calculated by taking the net operating income (NOI) of a property and dividing it by the current market value or purchase price. This formula helps appraisers assess the potential return on investment an investor might expect from the property.

Net income is crucial because it represents the revenues generated from the property after all operating expenses have been deducted. The value component is important as it reflects what the property is worth in the current market, influenced by various factors like location, property type, and current market conditions. Both net income and value provide essential data points for investors and appraisers to evaluate the financial viability of a property, making them the key pieces of information needed to ascertain the capitalization rate.