Property Valuation
What is the 'income capitalization approach' best suited for in Idaho?
AVacant land with no income
BIncome-producing properties where investors make decisions based on return on investment✓ Correct
CSingle-family owner-occupied homes
DGovernment-owned properties
Explanation
The income capitalization approach is best suited for income-producing investment properties (apartments, office buildings, retail centers) where value is driven by the income the property generates.
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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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