Final answer:
The cost approach takes into account the amount of money required to develop a similar property and is accurate for properties with new improvements that represent the highest and best use. However, it may not reveal the owner's return on investment.
Step-by-step explanation:
The strength of the cost approach is that it takes into account the amount of money required to develop a similar property. This means that it considers the cost of construction, materials, labor, and other expenses associated with building a property. By considering these costs, the cost approach provides an estimate of the value of a property based on what it would cost to rebuild or reproduce it.
Additionally, the cost approach is particularly accurate for properties with new improvements that represent the highest and best use. This means that if a property's value is largely determined by its potential use or the improvements made to it, the cost approach provides an accurate estimate. For example, if a property is developed with the intention of being a luxury hotel, the cost approach would consider the cost of developing a similar luxury hotel.
However, it's worth noting that the cost approach may not always reveal the owner's return on investment. While it considers the cost of development, it does not take into account factors like market demand or the potential income generated by the property. Therefore, it may not provide a complete picture of the return on investment for an owner.