Income Approach Property Valuation Example

We will discuss the three major formulas that comprise the approach.

Income approach property valuation example. In commercial real estate there are a few generally accepted methods for appraising or valuing real property. This tool is a very flexible and basic excel model that allows you to perform a valuation of a real estate property. The three most common are the cost approach the sales comparison method and the income approach. In order to estimate the subject property value using the income approach the first step is to create a proforma cash flow statement for the anticipated holding period.

Also it includes a sensitivity analysis of the output value obtained through the income approach. The second income approach method is the discounted. 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. Income approach example using yield capitalization.

Income approach is a real estate valuation method used by investors to appraisal a piece of real estate based on its earnings profitability and risk. The income approach to property valuation is a useful tool for investors to evaluate income producing real estate. Adding the land value to the value of the improvements results in a total property value estimate of 2 535 000. The model includes a cost approach and an income approach.