Which of the following is a typical characteristic of properties with lower cap rates?

Properties with lower cap rates are generally associated with higher income stability. The capitalization rate, or cap rate, is a measure used to evaluate the return on investment of a real estate property, calculated by dividing the net operating income by the property's current market value. When a property has a lower cap rate, it often indicates that the property is valued higher relative to its income, which may occur in markets perceived as stable or secure. Such properties are typically seen as lower risk investments due to their consistent income generation and potential for steady cash flow.

Investors often favor such properties because they tend to have more reliable tenants, longer lease terms, and are located in desirable areas, leading to lower vacancy rates and less fluctuation in income. The attractiveness of these aspects contributes to the perception of reduced risk, which aligns with the characteristic of higher income stability.

In contrast, properties with higher cap rates might indicate greater perceived risk or volatility in income, potentially stemming from lower housing demand, less desirable locations, or other factors that could affect income stability negatively.