A Colorado appraiser valuing a hotel would most likely use which approach as primary?
Why B. Income approach (direct capitalization or DCF), since the hotel's value is directly tied to its income-producing capacity Is Correct
Answer B: B. Income approach (direct capitalization or DCF), since the hotel's value is directly tied to its income-producing capacity
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
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Key Terms to Know
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Math Concepts
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