California Real Estate Practice Exam

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What translates the value difference when a total value $300,000 is capped at rate 9%?

Income attributed
Investment secured
Income detached
Investment total

The correct answer is: Income attributed

The correct choice relates to the concept of income capitalization, which is commonly used in real estate to determine the value of an investment property based on its expected income. When a total value of $300,000 is capped at a rate of 9%, it implies that the estimated income generated by the property provides a basis for valuing it. To calculate the income attributed, you use the formula: Income = Value x Cap Rate In this case, the cap rate of 9% (or 0.09) applied to a total value of $300,000 implies: Income = $300,000 x 0.09 = $27,000 This $27,000 represents the annual income attributed to the property based on the capitalization rate. Understanding this calculation is fundamental in real estate as it helps investors and appraisers ascertain the worth of property by focusing on the income it can generate. The other options, while possibly relevant in a broader context, do not specifically convey the relationship between the value of the property and the income it produces when factoring in the cap rate. Thus, "income attributed" is the most accurate response in this scenario.