Property Valuation
An appraiser is valuing a Florida convenience store. Which valuation approach would most likely be given the greatest weight?
ASales comparison approach
BCost approach
CIncome approach✓ Correct
DAssessed value approach
Explanation
For income-producing commercial properties like a convenience store, the income approach (income capitalization) is typically given the most weight, as the primary motivation for buyers is the income-generating potential of the property.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
Math Concepts
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