- The market, or sales comparison approach uses arm’s length market sales of similar properties which are analyzed, compared, and adjusted to arrive at a value for the property.
- The cost approach estimates the material and labor costs to replace the subject property, and then the property value is calculated by subtracting accumulated depreciation from the replacement cost new.
- The income approach estimates the present value of future benefits to be derived from a property by capitalizing net income into an indication of value.
Choosing the most appropriate approach for a property’s value requires extensive knowledge of economic trends and the real estate market, but ultimately it comes down to identifying the factors that would influence an investor’s decision-making process.
In 1982, the Gallagher Amendment to the Colorado constitution set the assessment rate for commercial real estate at 29%. This results in higher taxes compared with a residential property.