Income Approach to Property Value

The appraisal method is used to determine the value of a property, based on the revenue generated by the property. The gross rent multiplier (GRM) is calculated, based on the gross rent and market value of comparable rental properties. The gross rent from the subject property is then multiplied by the GRM to determine the property's market value, via the income approach. For example, if an appraiser is analyzing a four-flat and discovers that similar four-flats in the area have market values that are 10.5 times their market rents, the appraiser will use a GRM of 105. Applied to the subject property, the appraiser will multiply the subject property's market rental income by 10.5 to estimate the property's appraised value, via the income approach. For more information, see the "Analyzing Appraisal Reports" article in the "About Loan Processing" section.

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