Property Valuation
The income approach to value is most commonly used for which type of Utah property?
ASingle-family owner-occupied homes
BIncome-producing properties such as apartments, commercial buildings, and investment properties✓ Correct
CVacant land in rural areas
DHistoric properties in need of restoration
Explanation
The income approach is the primary method for valuing income-producing properties—apartments, retail, office, industrial—where investors make purchase decisions based on expected income. It is less applicable to owner-occupied residences.
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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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