Property Valuation
The income approach to value is most commonly used for which type of Florida property?
ASingle-family residential homes in suburban areas
BVacant land in rural areas
CIncome-producing commercial and investment properties✓ Correct
DHistoric properties eligible for preservation tax credits
Explanation
The income approach (also called the income capitalization approach) is most appropriate for income-producing properties such as apartment buildings, office buildings, retail centers, and other commercial investment properties.
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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.
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