Income approach to value
The Income Approach to Value can be used to determine the assessed values for the following properties:
The Income Approach to Value (also referred to as the “rental income” approach) is used to estimate market value-based assessments by analyzing the anticipated future benefits or income from a property and converting this income into an estimate of present value.
While the Income Approach will provide more stability than the market-adjusted Cost Approach, there will continue to be a redistribution of taxes in reassessments. The Income Approach will reflect what has occurred in the real estate market and, as there are fluctuations in the real estate market, this will be reflected in the values produced by the Income Approach.
Calculating your property's assessment
The Income Approach does not consider the income from your business. The Income Approach considers only the income related to the real estate (what the property is or can be rented for).
To calculate your property's assessment using the Income Approach, the Assessment Branch refers to several years of data to stabilize a property’s income and expenses. As well, tenants’ rents and expenses can change from year to year.
The Income Approach produces stable and fair assessments when there are regular submissions of up-to-date, accurate and comprehensive property rent and expense data from rented and leased properties. Because of the importance of property rental data, income and expense requests are sent annually to property owners; there is a legislative requirement for property owners to provide this information.
Calculating assessments for properties that are not rented
The Income Approach estimates value of a property based on the income and expenses of similar properties. If the property is a type of property that is typically rented, the Income Approach could be applied. The Income Approach would be applied to appropriate groups of properties regardless of whether individual properties are rented or owned.