A triplex generates $3,600 monthly gross rent with annual operating expenses of $15,000. Using a capitalization rate of 8%, what is the estimated property value using the income approach?
Correct Answer
A) $351,000
First calculate Net Operating Income: ($3,600 × 12) - $15,000 = $43,200 - $15,000 = $28,080. Then divide by cap rate: $28,080 ÷ 0.08 = $351,000. The income approach uses NOI divided by the capitalization rate to determine value.
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An appraiser is using the cost approach to value a custom-built heritage home. The reproduction cost new is estimated at $850,000, the land value is $300,000, and total depreciation is calculated at $180,000. What is the property's estimated value using this approach?