What does the overall rate (OAR) encompass?

The overall rate (OAR) is an important concept in real estate valuation as it represents a comprehensive measure of the potential return on investment for properties. It encompasses a capitalization rate that includes the discount rate, recapture rate, and effective tax rates.

By including these components, the OAR provides a more accurate reflection of the total financial performance of an investment property. The discount rate accounts for the investor's required return, the recapture rate addresses the necessity of recovering the investment made into the property, and the effective tax rates offer insight into how taxation impacts the net income generated by the property.

This holistic view allows investors and assessors to better evaluate the viability of properties in terms of their financial returns and helps in making informed decisions about property acquisition or investment strategies. Understanding the overall rate is crucial for accurately assessing the value and investment potential of real estate assets.