What is the primary use of the income approach in property valuation?

The primary use of the income approach in property valuation is to value income-generating properties, such as rental buildings. This method focuses on the income-producing potential of a property, assessing its worth based on the expected income it can generate over time. It involves calculating the net operating income (NOI) of the property and applying an appropriate capitalization rate to derive its value. This approach is particularly effective for commercial properties, multi-family units, or any real estate where rental income is a significant factor.

In contrast, other methods such as assessing personal property values or determining market sales do not apply in this context, as they focus on different aspects of property valuation. The income approach specifically highlights the financial performance of income-generating properties, making it a critical tool for investors and appraisers who are interested in analyzing the profitability and financial viability of real estate assets.