Property Valuation
A Florida appraiser is appraising a 4-unit residential income property. Which appraisal approach is considered MOST applicable for this type of property?
ASales comparison approach
BCost approach
CIncome approach✓ Correct
DAll approaches equally weighted
Explanation
For income-producing properties (5+ units are commercial, but even 2-4 unit properties are valued as income properties), the income approach is typically given the most weight because buyers primarily evaluate these properties based on their income-generating potential. The sales comparison approach is used for 1-4 unit residential properties, with the income approach gaining weight as income potential increases.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Capitalization Rate (Cap Rate)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.
Math Concepts
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