An appraiser in New York is valuing a rent-stabilized building in Brooklyn using the income approach. The building generates $120,000 in gross rental income, but $30,000 of this is from rent-stabilized units below market rate. How should the appraiser handle this situation?
Correct Answer
B) Apply a capitalization rate that reflects the rent regulation restrictions
Under New York's rent stabilization laws, the appraiser should use the actual restricted rents but apply a capitalization rate that reflects the increased risk and limited income potential due to rent regulation. This approach accounts for the legal restrictions while providing an accurate market value.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
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- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
- → The sales comparison approach to appraisal is most appropriate for which type of property?
- → Which of the following correctly lists the three types of depreciation recognized in real estate appraisal?
- → The sales comparison approach to appraisal is most commonly used for which type of property?
- → Which four tests must a use satisfy to qualify as the highest and best use of a property?
- → Three depreciation:
- → Cap rate:
- → Which formula best represents the cost approach to appraisal?
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