Property Valuation
The income approach to value uses which formula?
AValue = NOI / Cap Rate
BValue = GRM x Monthly Rent
CValue = Cost - Depreciation
DBoth A and B are income approach methods✓ Correct
Explanation
The income approach includes direct capitalization (V = NOI / Cap Rate) and the Gross Rent Multiplier method (Value = GRM x Monthly Rent), both of which are income-based.
People Also Study
Related North Carolina Questions
- A property in Raleigh, NC has a net operating income of $48,000 and the market capitalization rate is 8%. Its estimated value using the income approach is:Property Valuation
- A NC landlord owns a 24-unit apartment complex. Average monthly rent is $950. If the vacancy rate is 8.33% (2 units vacant), the monthly effective gross income is approximately:Real Estate Math
- An appraiser is using the income approach to value a small apartment building. The property generates $96,000 annual gross income and has a 10% vacancy rate, operating expenses of $30,000, and a cap rate of 8%. What is the indicated value?Property Valuation
- The 'gross rent multiplier' (GRM) method is considered a quick, simplified income approach. It does NOT account for:Property Valuation
- An appraiser in NC who estimates the value of a proposed new development building uses which approach as the primary method?Property Valuation
- An income property in Greensboro has an NOI of $55,000 and a cap rate of 6.5%. Its value using the income approach is approximately:Real Estate Math
- A rental property generates $36,000 annual gross income with a 5% vacancy rate. Operating expenses are $14,000. If the cap rate is 7%, what is the estimated value?Real Estate Math
- An investor purchases a 6-unit apartment building in Fayetteville for $540,000. Monthly rent per unit is $750. What is the Gross Rent Multiplier (GRM)?Real Estate Math
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.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Study This Topic
Practice More North Carolina Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free North Carolina Quiz →