Property Valuation
In Oregon, when would an appraiser use the income approach as the PRIMARY method for a single-family rental home?
AAlways, since all residential properties generate rental income
BWhen the property is in a primarily investor-owned rental market where buyers make decisions based on income potential✓ Correct
CNever — the income approach is never used for single-family homes
DOnly when the sales comparison approach yields a higher value
Explanation
While the sales comparison approach is primary for most single-family homes in owner-occupied markets, the income approach gains importance when a single-family home is in a market dominated by rental investment. In Oregon markets where investors primarily purchase single-family rentals (certain Eugene or Portland neighborhoods), buyers' decisions are income-driven and the income approach carries more weight.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
Math Concepts
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