Approaches to value
Income approach
Valuing an investment property from the income it produces
Net operating income divided by a capitalization rate drawn from comparable sales. It is the approach investors actually think in, and it is the primary method for apartment buildings, offices and retail.
How the exam asks about it
Value = income ÷ rate. The same relationship rearranges into rate = income ÷ value and income = value × rate, and items use all three forms.
Related terms
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