Property Valuation
The 'income approach' to property valuation is most commonly used for:
ASingle-family residences
BIncome-producing properties such as apartment buildings✓ Correct
CVacant land
DNew construction homes
Explanation
The income approach is best suited for income-producing properties (e.g.
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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.
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.
Math Concepts
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