Income Approach
The income approach is a valuation approach based on the idea that property value is related to the property's ability to produce income. In practice, it can be implemented through direct capitalization and/or discounted cash flow analyses depending on the assignment and data availability.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Underwriting; acquisition valuation; refinance; impairment analysis (concept)
- Property types
- Income-producing real estate (most commercial; multifamily; hospitality; retail)
In practice
"Stabilized" vs "in-place" income assumptions are a primary driver of value; operators should explicitly label which is being used.
Related terms
Valuation and Appraisal
- Appraisal Standards of Professional Practice
- Capitalization Rate (Cap Rate)
- Direct Capitalization
- Discounted Cash Flow (DCF) Analysis
- Present Value (PV)
- Sales Comparison Approach
- Uniform Standards of Professional Appraisal Practice (USPAP)
General information, not legal, tax or financial advice.