Question

In the valuation of a large apartment complex, the most weight would be given to which of the following approaches to value?

a. the cost approach

b. the income approach

c. the sales comparison approach

d. all the approaches equally weighted

Answer 1

In valuing a large apartment complex, the income approach is given the most weight as it is based on the potential income of the property and is pertinent for income-generating real estate. The correct option is B.

Step-by-step explanation:

In the valuation of a large apartment complex, the most weight would typically be given to the income approach. This method focuses on the potential income that the property can generate, which is particularly relevant for income-producing properties like apartment complexes. The income approach takes into account the current market rents, occupancy rates, operating expenses, and capitalization rates to estimate the property's value.

Conversely, the cost approach might be more relevant for specialized or newer properties where comparable sales data isn't available, and the sales comparison approach is often used for residential properties where sufficient market data from similar property sales exists.

For investment properties, the expected revenue stream is a critical determinant of value, which is why appraisers place the most emphasis on the income approach in these cases.