This is one method which is used for the property valuation. Here the total worth of a property is being estimated based on the revenue potential. The income which is calculated can either be generated as rental income or from re-selling the property. This is quite a complicated method; however, it is quite frequently being used by the investors when they are to fix a value on a property or when it comes to assessing the profitability of their investment in the days to come.
Certain assumptions need to be made and one needs to rely on them in order to come to an accurate conclusion using the income method. Here are the assumptions that are required to be made:
- Property Resale Value: This includes assuming the value which the property is likely to yield if it is being resold. Various factors need to be taken into consideration while assessing the resale value of a property.
- Income which is likely to be generated from Rent: This is another area which needs to be assessed. As mentioned, income from rent plays an important role while using the income method for property valuation.
In order to