The most common appraisal method for commercial property is the Income Approach, especially for income-producing properties like office buildings, retail centers, and apartment complexes.
Here’s a quick breakdown of the three main methods:
| Method | Description | When It’s Used |
|---|---|---|
| Income Approach | Values property based on its income-generating potential (net operating income ÷ capitalization rate). | Most common for commercial properties like rental buildings, shopping centers, and office spaces. |
| Sales Comparison Approach | Compares the property to similar recently sold properties in the area. | Used when there are sufficient comparable sales, often for smaller commercial properties. |
| Cost Approach | Calculates the cost to replace the building minus depreciation, plus land value. | Often used for new buildings, unique properties, or when income data isn’t available. |
So, if you’re thinking typical commercial property, Income Approach is usually the go-to.
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