Income Approach Cap Rate

By dividing the 75 000 in estimated noi by this cap rate remember to convert the percentage to a decimal or 0 065 the property s fair market value by the income capitalization approach would. By dividing the net operating income of the subject property by the capitalization rate you have chosen you arrive at an estimate of 100 000 as the value of the building. The income capitalization formula looks like this.

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Real Estate Appraisals The Income Capitalization Approach

With the income approach an investor uses market sales of comparables for choosing a capitalization rate.

Income approach cap rate. For example when valuing a four unit apartment building. The capitalization rate and the net operating income noi. How to calculate income. So here s how to calculate each of the.

Net operating income i capitalization rate r estimated value v 10 000 0 10 100 000. The income capitalization approach formula. Example of the income approach. As you can see this appraisal approach consists of two main variables.

Property market value net operating income noi capitalization rate.