Property Valuation
A Kansas appraiser uses the cost approach to value. The formula is:
ANet Operating Income ÷ Capitalization Rate
BLand Value + Depreciated Cost of Improvements✓ Correct
CSales Price × Adjustment Factor
DGross Rent × Gross Rent Multiplier
Explanation
The cost approach formula: Land Value + (Reproduction/Replacement Cost of Improvements – Accumulated Depreciation) = Estimated Property Value.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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