Income Approach Property Valuation
The income approach to property valuation is suitable for income producing real estate.
Income approach property valuation. With the income approach a property s value today is the present value of the future cash flows the owner can expect to receive. Since it relies on receiving rental income this approach is most common for commercial properties with tenants. It s calculated by dividing the net operating income by the capitalization. When a property s intended use is to generate income from rents or leases the income method of appraisal or valuation is most commonly used.
The net income generated by the property is measured in conjunction with certain other factors to calculate its value on the current market if it were to be sold. The income approach is a real estate valuation method that uses the income the property generates to estimate fair value. Within the approach there are three.