Which appraisal method estimates value based on the income a property generates and is most appropriate for rental or investment properties?
Correct Answer
C) Income capitalization approach, used for rental and investment properties
The income approach estimates value by capitalizing the net operating income (NOI) of a property using the formula: Value = NOI ÷ Cap Rate. It is most appropriate for rental and investment properties such as apartment buildings and commercial real estate, where income generation is the primary driver of value.
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