Property Valuation
The income capitalization approach is least appropriate for valuing:
AAn apartment building in Burlington
BA single-family owner-occupied home in Montpelier✓ Correct
CA retail strip center in Rutland
DA ski resort condominium rented seasonally
Explanation
The income approach is least appropriate for owner-occupied single-family homes because they are not typically purchased for their income stream. The sales comparison approach is more applicable.
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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.
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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