Property Valuation
In Tennessee, an appraiser who values land separately from improvements is most likely using the:
AIncome approach
BCost approach✓ Correct
CSales comparison approach
DGross rent multiplier
Explanation
The cost approach requires separate valuation of the land (as if vacant) and the improvements (depreciated cost of construction). Land and improvements are valued separately and then added together.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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