Property Valuation
An Ohio appraiser needs to determine the value of a 20-unit apartment building. Which approach would typically receive the most weight?
ACost approach
BIncome capitalization approach✓ Correct
CSales comparison approach
DGross rent multiplier only
Explanation
For income-producing properties like apartment buildings, the income capitalization approach receives the most weight because buyers primarily make purchase decisions based on the income stream.
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Math Concepts
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