Using the income approach, what is the value of a property with an income of $52,000 and a rate of 12%?

To determine the value of a property using the income approach, the capitalization rate (rate) is applied to the net operating income (NOI) from the property. The formula used is:

Value = Income / Rate

In this scenario, the property generates an income of $52,000, and the capitalization rate is 12%, or 0.12 when expressed as a decimal.

Using the formula, the calculation proceeds as follows:

Value = $52,000 / 0.12

When you perform the division:

Value = $433,333.33

This rounds to $433,333, which confirms why this is the correct answer. The income approach is a fundamental method in real estate appraisal that focuses on the revenue-generating potential of a property, making it essential for appraisers to accurately apply the capitalization rate to the net income to assess property value effectively.

The other values given do not result from accurately applying the income and capitalization rate together, indicating a misunderstanding of the formula or misapplication of the rates involved.