Question

when estimating the value of a property that is limited in comparables, which approach is often used?

Answer 1

When a property has limited comparables, the following methods can be used instead for valuation purpose:

1. Income Approach- a) direct capitalization method which values the property by assuming infinite future cash flows and disocounting them at the capitalization rate.

b) discounted cash flow approach which ascertains the net operating income for future years by individually revising revenues and expenses and then discounting the NOI at the required rate of return.

2. Cost Approach- this method values a property at its replacement cost= value of the land plus the cost of construction of the property at today's rates