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The income approach is a real estate appraisal valuation method. It is one of three major groups of methodologies, called valuation approaches , used by appraisers. It is particularly common in commercial real estate appraisal and in business appraisal.
The income approach (similar to the methods used for financial valuation, securities analysis or bond pricing – where the implied property value is a function of the property's pro forma cash flow, or NOI in the context of real estate).
However, many small businesses will use the Seller Discretionary Method as a practical, simple method of business valuation. [8] This approach can then be blended with the income, asset-based, and market approaches for a robust valuation analysis. A number of business valuation models can be constructed that utilize various methods under the ...
An alternate, although less common approach, is to apply a "fundamental valuation" method, such as the "T-model", which instead relies on accounting information. Other methods of discounting, such as hyperbolic discounting, are studied in academia and said to reflect intuitive decision-making, but are not generally used in industry. In this ...
This method has the advantage of being simple and based on market information, so it is often used to establish approximate values for use in determining royalty rates, tax, and inputs for the income method. Direct approach: The direct approach is based on the current value of shares of intellectual property in an Intellectual Property (IP ...
Real Estate Valuation According to Standardized Methods: An Empirical Analysis (PDF). Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät. doi:10.18452/3501. (411 KiB) A study of the theoretical soundness and empirical accuracy of the German income approach (includes the valuation equations for the Ertragswertverfahren
There are at least six recognized methods of the income approach, with some authorities listing more. [5] Price premium method – estimates the value of a brand by the price premium it generates when compared to a similar but unbranded product or service. This must take into account the volume premium method.
An alternative approach to the net asset value method is the excess earnings method. (This method was first described in the U.S. Internal Revenue Service's Appeals and Review Memorandum 34, [further explanation needed] and later refined by Revenue Ruling 68-609.) The excess earnings method has the appraiser identify the value of tangible ...