Cost Approach

Filed Under » ,
Dictionary Says

Definition of 'Cost Approach'

A real estate valuation method that surmises that the price someone should pay for a piece of property should not exceed what someone would have to pay to build an equivalent building. In cost approach pricing, the market price for the property is equivalent to the cost of land plus cost of construction, less depreciation. It is often most accurate for market value when the property is new.
Investopedia Says

Investopedia explains 'Cost Approach'

Cost approach is one of three popular valuation methods for real estate, the others are the income approach and the comparables approach. The cost approach methodology requires certain assumptions, such as the availability of land. If land is not available to build on then it is not possible to substitute existing property. Additionally, the method does not address whether an exactly equivalent structure must be built is to be built, or what if the cost of an equivalent building can be effectively estimated.

Related Definitions

Search results for

'Cost Approach'

  • 4 Ways To Value A Real Estate Rental Property

    http://www.investopedia.com/articles/mortgages-real-estate/11/how-to-value-real-estate-rental.asp
    ... (For related reading, see How Interest Rates Affect Property Values.) Cost Approach
    The cost approach to valuing real estate states that property is really ...

  • CFA Level 1 Study Guide - Alternative Investments - Real Estate ...

    http://www.investopedia.com/exam-guide/cfa-level-1/alternative-investments/real-estate-calculations.asp
    ... 11.8 Marginal Cost of Capital; 11.9 Factors Affecting the Cost of Capital; ... 14.37
    Bond Value and Price; 14.38 Arbitrage-free Valuation Approach; 14.39 Typical Yield ...

  • CFA Level 1 Study Guide - Alternative Investments - Alternative ...

    http://www.investopedia.com/exam-guide/cfa-level-1/alternative-investments/alternative-investment-valuation.asp
    ... 11.8 Marginal Cost of Capital; 11.9 Factors Affecting the Cost of Capital; ... 14.37
    Bond Value and Price; 14.38 Arbitrage-free Valuation Approach; 14.39 Typical Yield ...

  • CFA Level 1 Study Guide - Corporate Finance - Cost of Retained ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/cost-of-retained-earnings.asp
    ... 11.8 Marginal Cost of Capital; 11.9 Factors Affecting the Cost of Capital; ... 14.37
    Bond Value and Price; 14.38 Arbitrage-free Valuation Approach; 14.39 Typical Yield ...

  • The Island Approach To Credit Card Use

    http://www.investopedia.com/articles/pf/11/island-approach-credit-cards.asp
    ... People therefore need to change how they approach spending. They need financial
    discipline, clarity and most importantly a way to lower the cost of debt. ...

  • Patents Are Assets, So Learn How To Value Them

    http://www.investopedia.com/articles/fundamental-analysis/09/valuing-patent.asp
    ... Cost Approach This approach states that the value of a patent is the replacement
    cost - the amount that would be necessary to replace the protection right on ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Arbitrage ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/arbitrage-free-valuation-approach.asp
    ... 11.8 Marginal Cost of Capital; 11.9 Factors Affecting the Cost of Capital; ... 14.37
    Bond Value and Price; 14.38 Arbitrage-free Valuation Approach; 14.39 Typical Yield ...

  • A New Approach To Long-Term Care Insurance

    http://www.investopedia.com/articles/retirement/06/NewLTCPlan.asp
    A New Approach To Long-Term Care Insurance. ... The Growing Cost of Long-Term Care Under
    the traditional long-term care (LTC) insurance policies, you pay an annual ...

  • A New Approach To Equity Compensation

    http://www.investopedia.com/articles/06/FAS123R.asp
    A New Approach To Equity Compensation. ... (To learn more, see The "True" Cost Of Stock
    Options.) How it Affects You Why should this matter to you as an investor? ...

  • Fight The Good Dollar-Cost Averaging Fight

    http://www.investopedia.com/articles/stocks/07/dca-fight.asp
    ... Dollar-cost averaging (DCA), or regular payments into an investment fund over a
    long period of time, is an extremely controversial and hotly debated approach ...

Related Articles

Bank Rates
Product Today Last Wk
$10K MMA 0.50% 0.51%
MMA 0.45% 0.46%
6 Month CD 0.46% 0.47%
1 Year CD 0.70% 0.75%
5 Year CD 1.46% 1.46%
1 Year Jumbo CD 0.66% 0.67%
Rate data provided by Bankrate
Product Today Last Wk
$30K HELOC 4.59% 4.60%
$30K Home Equity Loan 5.74% 5.77%
$50K Home Equity Loan 5.45% 5.50%
$50K HELOC 4.24% 4.24%
$100K Home Equity Loan 5.41% 5.46%
$100K HELOC 4.13% 4.13%
Rate data provided by Bankrate
Product Today Last Wk
30 Year Fixed 3.80% 3.80%
15 Year Fixed 3.09% 3.11%
1 Year ARM 3.54% 3.53%
30 Year Fixed Jumbo 4.38% 4.38%
5/1 ARM 2.65% 2.69%
3/1 ARM 2.69% 2.69%
Rate data provided by Bankrate
Product Today Last Wk
60 Month Used Car Loan 4.51% 4.51%
48 Month Used Car Loan 4.35% 4.35%
48 Month New Car Loan 3.24% 3.24%
36 Month Used Car Loan 4.34% 4.36%
36 Month New Car Loan 3.11% 3.13%
60 Month New Car Loan 3.35% 3.34%
Rate data provided by Bankrate
Partner Links