Certified Residential Appraiser Practice Exam

What is the formula for solving income in appraisal?

1. R x V = I

2. I / V = R

3. I x R = V

4. V / R = I

The correct answer is: R x V = I

The formula for solving income in appraisal is primarily expressed as Revenue (R) multiplied by Value (V) equals Income (I). This formula establishes the relationship between income generated from a property, the value of that property, and the rate of return or revenue it can generate. This formula is foundational in real estate appraisal and is used to determine how much income an investment property is generating based on its value and expected rate of return. It is particularly relevant in the income approach to valuation, where appraisers evaluate properties based on the income they produce. The connection between these three variables allows appraisers to assess investment potential and make informed decisions regarding property values in the market. In contrasting formulas, the variations present in other choices reconfigure the basic elements but do not shift the fundamental relationship that this formula expresses. In essence, the structure of the formula helps real estate professionals to understand and analyze property investments effectively.