Income Approach
The income approach is an appraisal method that values a property based on the rental income it generates.
What Income Approach means
Used mainly for investment and commercial properties, it converts expected net income into value using a capitalization rate. It is central to how DSCR lenders and investors assess deals. Comparable rents support the estimate.
Florida example
An appraiser valued a Florida fourplex with the income approach, dividing its net operating income by a market cap rate to arrive at value.
What it is
The income approach values a property based on the income it can produce. Appraisers use it for rentals and investment properties.
It ties value to expected cash flow.
Why it matters
For investors, the income approach shows what a rental is really worth. It supports DSCR financing.
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Verify the details for your own situation against these government and agency sources: Freddie Mac Primary Mortgage Market Survey and Federal Reserve H.15 selected rates.