Property Valuation
A Georgia appraiser is valuing a neighborhood convenience store. Which approach to value is most likely to be primary?
ASales comparison approach
BCost approach
CIncome capitalization approach✓ Correct
DAssessed value approach
Explanation
For income-producing commercial properties like a convenience store, the income capitalization approach is the primary method because investors make purchase decisions based on the property's ability to generate income.
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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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