How does the income approach to property valuation work, and when is it most commonly used in Alberta?
Correct Answer
B) It estimates value by capitalizing the net operating income the property produces using a capitalization rate; most commonly used for investment and commercial properties
The income approach estimates a property's value by dividing its annual net operating income (NOI) by an appropriate capitalization rate derived from market data. In Alberta, this approach is most commonly used for commercial, office, retail, and multi-family investment properties where rental income drives the property's value.
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