Humber/Ontario Real Estate Course 2 Exam Practice

Which would be the most appropriate approach to value when establishing value for an investor-owned triplex?

1. The Cost Approach

2. The Income Approach

3. The Special Purpose Approach

4. The Direct Comparison Approach

The correct answer is: The Income Approach

When establishing value for an investor-owned triplex, the most appropriate approach would be the Income Approach. This method is commonly used for income-producing properties like multi-unit residential buildings because it focuses on the property's income potential. With the Income Approach, the value is determined by analyzing the income generated by the property, including rental income and any other sources of income. By considering the property's potential income, expenses, and overall financial performance, investors can determine how much they are willing to pay for the triplex based on its income-generating capabilities. While the Cost Approach, Direct Comparison Approach, and Special Purpose Approach are valid methods for valuing properties in certain situations, they may not be as suitable for investor-owned multi-unit residential properties like triplexes. These approaches typically focus on different aspects such as construction costs, market comparisons, or unique property features, which may not fully capture the income potential of an income-producing property like a triplex.