In October 2026, appraiser Renee Walker is valuing a fourplex owned by Sam Lewis. One unit is leased to Sam's cousin at a rent far above what similar units in the area command. When applying the income approach, which rent figure should Renee rely on?
Correct Answer
A) The market rent supported by comparable rentals in the area
The income approach is based on market rent or income that the property can reasonably be expected to earn in the market. A rent that is artificially high because of a non-market relationship is not the best indicator of market value.
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Previous Question
In December 2026, appraiser Hannah Reed extracts a consistent GRM of 100 from three recent comparable rental sales. If the subject property's monthly market rent is $3,400, what value is indicated by the income approach?
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In November 2026, a comparable investment property sold for $756,000. Its potential gross income was $55,000, vacancy and collection loss was 5%, and the expense ratio was 43% of effective gross income. Rounded to the nearest whole percent, what overall cap rate does the sale indicate?