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What is the Income Approach?

The income approach to value is based on an estimate of net income derived from the operation of an income-producing property and selecting a capitalization rate from market indications of similar properties to convert that income to an estimate of present worth for the property.

The principle of anticipation is the basis of the income approach and affirms that value is created by the expectation of financial benefits to be derived from the possession, operation and/or capital gain from selling a property.