Do you use assessed value or market value when calculating Cap Rate?
How can an increase in cap rate cause market value to decline, shouldn't it be the other way around?
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Think of a cap rate like a Bond Yield.
If yields on a bond go up, the value of the bond goes down.
Yes, but shouldn’t a decrease in market value cause the increase in cap rates since the cap rate formula has market value in the denominator? I thought cap rates were purely determined by NOI/Market value?
Yes, assuming no change to an asset's NOI, if the purchase price of that asset decreases, the cap rate (yield) for the buyer of that asset will increase. I'm not sure i understand where your confusion is.
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