The income approach works best for properties that have predictable expenses. With this valuation method, an investor looks at the property’s income compared to the property’s expected rate of return.
Below are two common ways to determine a commercial property’s projected income.
2.Replacement Cost Approach
The Cost approach determines the cost of a parcel by assuming it should be the same price as a similar building. This means the market value should equal the cost of the land, plus the cost of construction, minus any depreciation to the structure. The lack of a comparable site and similar construction materials can make the appraisal less accurate.
The Cost approach can be derived by figuring out the price of an exact duplicate. It can also be achieved by using a replacement structure with the same function but with updated materials, the latest construction methods and a more modern design.
3.Market Value Approach
Typically, an appraiser uses both recently sold improved properties and the list prices of current buildings up for sale. This is done because markets constantly go up and down in value.
Critical to conducting an accurate Sales Comparison approach, includes comparing projects with nearly the same characteristics, such as square footage and lot size. Finally, sales which are recent provide a more accurate appraisal conclusion.
65 Whitlock Ave SW
Marietta, GA 30064