The income approach converts rent into value, usually net operating income divided by a cap rate. It is more common on rentals than on owner-occupied houses.
The income approach to value converts a property's expected income into a value, most often net operating income divided by a capitalization rate. It shows up more on rentals than on owner-occupied houses. The other two traditional approaches are cost and sales comparison. This page names the rent math, not a landlord's workbook.
How does the income approach calculate value?
A common direct-capitalization formula is value = net operating income ÷ cap rate. The IAAO glossary defines the income approach as converting expected economic benefits of owning a property into value. IAAO's Standard on Mass Appraisal prefers that path for income-producing property when the income data are reliable.
Example: $24,000 of net operating income ÷ 6% = $400,000. That labeled walkthrough is an example, not a market survey of cap rates.
Look up if you are overpaying.
Does a house appeal use the income approach?
Usually not as the lead method. Owner-occupied houses more often sit in sales comparison or cost. A property tax appeal on a rental can still be a fight over the printed number those rents produced. The property tax glossary keeps the three approaches labeled. You pay only if FairAppeal saves you money, and there are no upfront costs with Fair Appeal.