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The most commonly used approach when valuing Idaho income properties is the capitalization approach.  Most residential sales use the sales comparison approach by finding sold "comps".  The capitalization approach on the other hand looks at the potential annual net operating income and market "cap rates" to determine value.  Below is an overview of how this process works.

There's three parts to the formula: Income, Rate, and Value.  I remember this by thinking "IRV" and having memorized this formula:

Income  / Rate = Value

Step 1: Determine Income (Annual Net Operating Income: "NOI").

To determine a property's annual NOI, you'll take gross rents less expenses.

Here's an overview of how this looks:

A) Gross Operating Income:

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