Copyright © 2006 - 2007 Downers Grove Township•••••All Rights Reserved
Copyright © 2006 - 2007 Downers Grove Township•••••All Rights Reserved
ASSESSMENT PROCEDURES
Once the Net Operating Income is known, a capitalization rate is used to convert the income into value. The capitalization rate has three components:
1. The Discount Rate - rate of return on the investment.
2. The Recapture Rate - rate of return of the investment.
3. The Effective Tax Rate - takes into account property tax.
The Net Operating Income is divided by this Overall Capitalization Rate to arrive at the property's value.