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Items of Interest |
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Frequent Questions |
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The Income Approach
The income approach is used to value commercial or industrial properties, or properties
which are bought and sold by investors primarily because of their income producing
potential. This approach to value depends on reliable and detailed information on
the income and the costs of doing business for a particular business or enterprise.
This is referred to as the "income stream" of the property. The income approach
defines value as "the present worth of future benefits of owning a property." These
are composed of the annual income for an estimated number of years (called the economic
life of the property) plus a capital amount representing land value or land value
plus some remaining worth of the improvements. This approach emphasizes investment
components rather than physical components of a property.
The steps in the income approach are:
- Estimate potential gross income (PGI)
- Deduct vacancy and collection losses
- Add miscellaneous income to derive effective gross income (EGI)
- Deduct operating expenses to derive net operating income (NOI)
- Select appropriate capitalization rate and method
- Develop an estimated value
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Assessor's Office |
31 N Pinal Street
Building E
Florence, AZ 85132
Office Hours
Monday to Friday
8:00AM to 5:00PM
Office: 520.866.6361
Fax: 520.866.6353
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