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Appraising 101:

The Income Approach

The Income Approach applies to investment property. Most investment property is expected to produce a positive cash flow.  In the case of residential property the cash flow usually comes from rents collected.  An appraiser using the Income Approach will determine the probable income from the property.  Then they will apply a multiplier to that income to estimate the amount a typical investor would be willing to pay for the property, given the amount of income it's expected to produce.  Multipliers are generated from analyzing sales of similar income properties in the area.  It's a complex process that applies more to multi-unit housing, and usually isn't used for valuing single family residences.