income approach

1. The income approach estimates the value of a property based on its income-generating potential. It is commonly used for commercial properties, such as office buildings, retail centers, and apartment complexes. The key concept behind the income approach is that the value of a property is determined by its ability to generate income for the owner.

The income approach involves calculating the net operating income (NOI) of the property, which is the potential rental income minus operating expenses. The NOI is then divided by a capitalization rate (cap rate) to determine the property’s value. The cap rate is derived from market data and reflects the expected rate of return on the investment.