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EFFECTIVE TAX RATE. . . To make the proper provisions for <br /> real estate taxes, the appraiser must anticipate two <br /> factors: <br /> 1. The Tax rate for assessed valuation; and <br /> 2. The percentage of the appraised value to be used for <br /> assessment purposes. <br /> The annual rate required to pay the cost of taxes can then <br /> be calculated by multiplying the rate in dollars per $100.00 <br /> assessment (equivalent to a percentage) by the percentage <br /> level of assessment. <br /> Examples: <br /> A <br /> Tax Rate per $100. 00 Assessment 5. 00 4. 40 8. 00 <br /> xPercentage Level of Assessment 33-1/3% 33-1/3% 33-1/3% <br /> =Required . 1. 67% 1.47% 2 . 67% <br /> Capitalization Methods <br /> The most prominent methods of capitalization are Direct, <br /> Straight Line, Sinking Fund, and Annuity. Each of these is <br /> a valid method for capitalizing income into an indication of <br /> value. The basis for their validity, as we have seen, lies <br /> in the action in the market which indicated that the value <br /> of income producing property can be derived by equating the <br /> net income with the net return anticipated by informed <br /> investors. This can be expressed in terms of a simple <br /> equation: <br /> VALUE = NET INCOME / CAPITALIZATION RATE <br /> In Direct Capitalization, the appraiser determines a single <br /> "over-all" capitalization rate. This is done by analyzing <br /> actual market sales of similar types of properties. He <br /> develops the net income for each property and divides the <br />