Income Approach
 |
Definition of 'Income Approach'A real estate appraisal method that allows investors to estimate the value of the property based on the income produced. The income approach is computed by taking the net operating income of the rent collected and dividing it by the capitalization rate (the investor's rate of return). It is most typically used for income producing properties and the formula is:Market Value= Net Operating Income Capitalization Rate Also called the "income capitalization approach". |
 |
Investopedia explains 'Income Approach'The income approach is one of three popular approaches to appraising real estate. The others are the cost approach and the comparison approach. Often most important for hotels, apartments and office buildings.Because the income approach methodology looks at the rents and values of real estate in the area, it may not take into account features that a piece of property may have, the condition of the property, the exact neighborhood or financing concessions. As such, people looking to invest in property use the income approach as a quick snapshot of what property might be worth. |
Related Definitions
Articles Of Interest
-
Add Some Real Estate To Your Portfolio
From REITs to owning your own home, find out how diversify your portfolio with real estate assets. -
Top 6 Mortgage Mistakes
These common errors could end in foreclosure. -
Condo Complications: The Issues Behind Ownership
Being a "condo person" is just one of the issues you'll have to examine when deciding if a condo is right for you. -
10 Tips For Getting A Fair Price On A Home
Don't let buying a home bust your budget. Make sure the house you choose is worth the price you pay. -
Flipping Houses: Is It Better Than Buy and Hold?
Real estate investors can flip a property or use it for cash flow. Find out which will work in your neck of the woods. -
Reverse Mortgage Pitfalls
Before tapping your home equity, find out what can go wrong. -
Mergers And Acquisitions: Understanding Takeovers
In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game. -
Interpreting A Company's IPO Prospectus Report
Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future. -
After A Big Recovery Rally, It's Up To Renew Blue For Best Buy
Investors have bought Best Buy's story, but this quarter shows that a lot of work remains to be done -
If You Don't Mind Volatility, Deere Could Still Do Alright
Though Deere's shares sold off after earnings, the business model is sound and rolling along.
Free Annual Reports
