The Income Method of Estimating a Propertys Value

The income method is used to estimate the value of an income-producing property, based on the net income the property produces. Under the income method, value is calculated using a:

1. Capitalization rate: The capitalization rate, or cap rate, is calculated by dividing a property's annual net operating income by its purchase price.

2. Gross rent multiplier: The gross rent multiplier (GRM) is calculated by dividing the purchase price by the property's monthly gross operating income.

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