Valuation Methods in Real Estate Investment

A property management company is evaluating a commercial real estate investment using different valuation methods. The company acquired a downtown office building and wants to assess its market value. They are considering the following three methods: the Income Approach, the Comparable Sales Method, and the Cost Approach.

The Income Approach estimates value based on the income that the property generates, whereas the Comparable Sales Method derives value by comparing similar properties that have been recently sold. The Cost Approach determines value based on the cost to replace or reproduce the property, minus depreciation.

Which of the following methods is generally considered most appropriate for valuing an income-producing property in a stable market where comparable properties can be identified?