The income capitalization approach to value is most commonly applied to:
Why Income-producing commercial and investment properties Is Correct
Answer B: Income-producing commercial and investment properties
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.
People Also Study
Related Colorado Questions
- Using the income approach: a Colorado commercial property generates $80,000 NOI. Comparable properties sell at a 7% cap rate. What is the property's indicated value?Real Estate Math
- A Colorado appraiser uses the 'Income Capitalization' approach on a commercial property. The NOI is $85,000 and the market cap rate is 6.5%. What is the value?Property Valuation
- The sales comparison approach to value is most commonly used for:Property Valuation
- In the income approach to value, the capitalization rate (cap rate) is calculated as:Property Valuation
- An appraiser uses the cost approach to value a Colorado commercial property. The replacement cost new is $800,000 and the property has 25% depreciation. The land is worth $150,000. What is the indicated value?Property Valuation
- A Colorado property's cap rate is 8% and the NOI is $64,000. What is the property's value under the income approach?Real Estate Math
Key Terms to Know
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Study This Topic
Practice More Colorado Real Estate Questions
1,400+ questions covering all exam topics. Start free — no signup required.
Take the Free Colorado Quiz →