Property Valuation
In Montana, an appraiser appraising a complex that includes both commercial and residential uses would most likely use:
AOnly the cost approach
BMultiple approaches as applicable, giving the most weight to the income approach for this type of income-producing mixed-use property✓ Correct
COnly the sales comparison approach
DOnly the income approach with no consideration of other approaches
Explanation
For mixed-use income-producing properties, the income approach often receives the most weight. The appraiser considers all applicable approaches and reconciles them based on data availability and property type.
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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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