Property Valuation
Which type of property would most likely be appraised using the income approach?
AA single-family home
BA vacant residential lot
CAn apartment complex✓ Correct
DA newly built church
Explanation
The income approach is most appropriate for income-producing properties like apartment complexes, where value is derived from 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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