What is the resulting weighted average called when using the band of investment method?

The resulting weighted average, when using the band of investment method, is called the overall capitalization rate (Ro). This method is employed to estimate the capitalization rate for an income-producing property by considering the weighted average of the costs associated with both equity and debt financing.

In a typical scenario, appraisers assess the costs of equity (investor returns) and debt (interest rates of loans) and assign them appropriate weights based on their proportions in the overall financing structure. The weighted averages of these rates yield the overall capitalization rate, which is crucial for valuing properties based on expected income. This rate helps in converting future income into present value, thereby allowing investors to determine a fair price for the property.

The overall capitalization rate (Ro) is a fundamental component in commercial real estate appraisal and is used to inform investment decisions and property valuations. Other terms like overall expense ratio, net operating income, and yield rate represent different financial metrics and do not specifically pertain to the weighted average derived from the band of investment method. Hence, recognizing Ro as the relevant outcome highlights its importance in the appraisal process.