This analysis of the income approach which briefly discusses the propriety of its admissibility and some distinctions between allowable income and improper income, highlights the strengths and weaknesses of the various capitalization techniques and gives more insight into their use. The techniques discussed here include the anticipated user or developmental approach; the gross rent multiplier approach; the economic rental approach; the leased premises-reversionary approach; and the mortgage equity approach (referred to as the Ellwood approach, it is both an approach and a capitalization technique). Embodied within the first four of these approaches to value is one of three capitalization techniques: gross rent multiple capitalization; overall rate (OAR) capitalization on a direct property residual basis; and the residual techniques - the building residual technique, and the land residual technique. Analysis of the bases indicate that although the income approach is readily used, some courts and lawyers are not conversant with the details of the techniques or the assumptions embodied in them. The examination of legal authorities and appraisal techniques contained in this discussion should enable attorneys to prepare more fully for cases involving the income approach and enable them to make a complete record on which an appeal could be based.


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Filing Info

  • Accession Number: 00148908
  • Record Type: Publication
  • Files: TRIS, TRB
  • Created Date: Aug 28 1998 12:00AM