What does the Income Approach to appraisal primarily focus on?

The Income Approach to appraisal primarily focuses on the property's ability to generate income. This method is commonly used for investment properties, such as rental homes, commercial buildings, or multifamily units, where the primary value comes from the income produced by the property.

In using this approach, appraisers analyze the potential revenue generated by the property, considering factors such as rental income, occupancy rates, and operating expenses. The goal is to estimate the present value of future income streams that the property is expected to generate over time. Key calculations often involve determining the net operating income (NOI) and applying capitalization rates to arrive at the property's value.

By honing in on the income-generating potential, the Income Approach helps investors make informed decisions regarding property purchases, investments, or management strategies. This contrasts with other methods that may emphasize different aspects, such as resale value, aesthetic appeal, or location.