When developing an overall cap rate, which category is NOT considered as a required comparability factor?

When developing an overall capitalization rate (cap rate) for appraisal and investment analysis, several key comparability factors are typically used to ensure that the cap rate reflects the market's characteristics and the specific traits of the property being evaluated. Among these factors, location, investment attributes, and utility of the property are standard considerations.

Potential profit, while important in the broader context of investment analysis, is not a direct factor in establishing comparability when calculating cap rates. Instead, cap rates are determined based on existing income streams and expenses associated with properties. By focusing on concrete elements such as location (where the property is situated), investment characteristics (such as risk and return profiles), and utility (the usefulness of the property in fulfilling market needs), appraisers can arrive at a cap rate that better reflects current market conditions.

In contrast, potential profit is more speculative and involves projections and forecasts about future performance rather than reflecting the present value or yield characteristics of comparable properties. Thus, it does not serve as a required comparability factor when determining cap rates.