Property Valuation
In Louisiana, the 'income approach' would be LEAST appropriate for valuing which property type?
AAn apartment building with market-rate tenants
BAn owner-occupied single-family home in a residential neighborhood✓ Correct
CA neighborhood retail strip center
DAn office building with multiple tenants
Explanation
Owner-occupied single-family homes are primarily purchased for personal use rather than income generation. The sales comparison approach is most appropriate for such properties, while the income approach is best suited for income-producing investment properties.
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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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