California · Chapter 22 of 59
Income Approach
Used for income-producing property. Capitalization rate, GRM, NOI, and effective gross income.
30-minute read · Built for the DRE Salesperson Exam
income approachcapitalization rateGRMGIMNOIeffective gross incomepotential gross income
When It's Used
The income approach is used for income-producing properties (apartments, office buildings, retail, industrial). It values property based on its ability to generate income. Formula: Value = NOI / Cap Rate (for investment properties) or Value = Gross Rent × GRM (simpler method for small income property).
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