- 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.