Property Valuation
In Washington, the market value of a property that is subject to long-term below-market leases is likely:
AHigher than a comparable unencumbered property
BLower than a comparable unencumbered property because the below-market rents reduce income to a value-less level✓ Correct
CThe same as an unencumbered property
DBased only on the building's replacement cost
Explanation
A property encumbered by below-market long-term leases generates less income than an unencumbered comparable property. This depresses the income capitalization approach value. The difference between market and leased-fee value is called 'leasehold value.'
Related Washington Property Valuation Questions
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