Income approach

Question 1

A rate of return, stated as a percent, used to derive a value opinion from the anticipated net operating income a property could generate

Answer 1

Capitalization rate

Question 2

The time during which a building can be used for its intended purpose or generate more income than is paid out for operating expenses

Answer 2

Economic life

Question 3

Potential gross income less vacancy and collection losses

Answer 3

Effective gross income (EGI)

Question 4

All income received from all sources

Answer 4

Gross income

Question 5

The conversion factor derived from the sale price of a comparable rental property divided by it’s gross monthly rent. This factor is multiplied by the estimated rent of the subject to estimate its value

Answer 5

Gross rent multiplier (GRM)

Question 6

A simple calculation for finding the (net operating) Income, the (capitalization) Rate, or the Value of an investment property. When any two factors are known, the third can be determined

Answer 6

IRV formula

Question 7

Income after all operating expenses have been deducted but before that service and taxes are considered

Answer 7

Net operating income (NOI)