Property Valuation
Which West Virginia property would most benefit from use of the income approach?
AA single-family residence in a new subdivision
BA vacant residential lot
CA 20-unit apartment complex✓ Correct
DA historic single-family home with no comparable sales
Explanation
The income approach is most appropriate for income-producing properties like apartment complexes, where value is directly related to the income stream the property generates. A 20-unit apartment complex is ideal for the income approach.
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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.
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.
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