California Real Estate Practice Exam

In appraising a residential rental complex with 300 units, which valuation approach is most heavily relied upon?

1. Sales comparison

2. Cost

3. Income capitalization

4. Market

The correct answer is: Income capitalization

The valuation approach most heavily relied upon for an appraisal of a residential rental complex with 300 units is the income capitalization approach. This method takes into account the property's potential income, expenses, and market factors to determine its value. Other options, such as the sales comparison approach, may be useful for valuing individual units within the complex, but they do not take into account the income potential of the entire complex. The cost approach may also be used, but it mainly considers the replacement cost of the property and may not accurately reflect its current market value. The market approach is too broad and does not consider the specific income-generating factors of the complex. Therefore, the most appropriate and accurate approach for valuing a residential rental complex with 300 units is the income capitalization approach.