Property Valuation
An Iowa commercial property appraiser analyzing a strip mall would most likely use which appraisal approach as the primary method?
ACost approach
BIncome capitalization approach✓ Correct
CSales comparison approach using residential comps
DLand residual technique only
Explanation
For income-producing commercial properties like strip malls, the income capitalization approach is typically given the most weight, as buyers primarily analyze these properties based on their income-generating potential and net operating income.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
Math Concepts
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