Property Valuation
In the income approach to value, a property's value is derived by:
AAdding the land value to depreciated building cost
BDividing net operating income by the capitalization rate✓ Correct
CComparing to recent sales of similar properties
DEstimating the replacement cost of improvements
Explanation
The income approach calculates value by dividing Net Operating Income (NOI) by the capitalization rate: Value = NOI ÷ Cap Rate. It is used for income-producing properties.
Related Connecticut Property Valuation Questions
- An appraiser using the cost approach to value a property would:
- A Connecticut property's income statement shows: Potential gross income $96,000; vacancy 5%; operating expenses $32,000. What is the NOI?
- A Connecticut appraiser determines that a property has a remaining economic life of 35 years and a current effective age of 15 years. The total economic life estimate is:
- If a Connecticut income property has an NOI of $90,000 and the market cap rate is 6%, what is the estimated value using the income approach?
- An appraiser's final value conclusion is $485,000 for a Connecticut single-family home. The sales comparison approach indicated $490,000, the cost approach indicated $470,000, and the income approach was not applicable. The appraiser placed most weight on the sales comparison approach. This process is called:
- A Connecticut commercial property with annual NOI of $75,000 and a 7% cap rate has an estimated value of:
- The 'physical life' of a building is estimated as the total years until the structure physically deteriorates to the point of being unsafe. For appraisal purposes, the more important concept is:
- An appraiser completing a Connecticut FHA appraisal must ensure the property meets:
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