ABSTRACT
The income approach or investment method assesses market value by capitalising the future income (cash flows) obtainable from the property. There are two parts to the valuation, namely the net receivable income and the yield. This chapter and Chapter 6 are concerned with the factors determining the net income, while Chapter 7 deals with the factors determining the yield. Various terms are used to describe rent, such as rack rent, fair rent, full rent; for most valuation purposes the valuer is interested in market rent. This is defined in the Red Book in VS 3.3 as:
The estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s-length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.
