Property Valuation
An Alaska property leased below market rent has which effect on its income-approach value?
AIncreases value because stable tenants are more desirable
BReduces value when the lower-than-market rent is used in the income approach✓ Correct
CHas no effect on value — market rent is always used in appraisals
DIncreases value since lower rent means lower expenses
Explanation
If a property is leased below market rent, using the actual (below-market) contract rent in the income approach will produce a lower value indication. Appraisers must distinguish between contract rent (actual) and market rent (what the property would command at arm's length) and typically value based on market rent for the 'as is' or 'fee simple' value.
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