An appraiser is using the income approach to value a 12-unit rental building in Brooklyn. The building generates $180,000 in annual gross rental income. Operating expenses total $54,000 annually. The appraiser determines that a 7.5% capitalization rate is appropriate for this type of property in this location. What is the indicated value using the income approach?
Correct Answer
B) $1,680,000
Using the income approach: Net Operating Income = Gross Income - Operating Expenses = $180,000 - $54,000 = $126,000. Value = NOI ÷ Cap Rate = $126,000 ÷ 0.075 = $1,680,000.
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