Income Approach
An appraisal method that estimates value by dividing a property's net operating income by the capitalization rate.
Quick flashcard
What does Income Approach mean on the Texas real estate exam?
Answer: An appraisal method that estimates value by dividing a property's net operating income by the capitalization rate.
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Income Approach definition
The income approach values income-producing property by dividing net operating income by the capitalization rate. Net operating income is income minus operating expenses, and it never includes mortgage debt service.
It is the primary method for rental and investment property such as apartment buildings and office space.
Source basis
Definition checked against the official sources below on .
On the exam
Exam trap
Tested in
Value & Appraisal (11 of 80 National)
From definition to recall
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