What is the primary measure used in the income approach to determine a property's value?

The primary measure used in the income approach to determine a property's value is Net Operating Income (NOI). NOI represents the total income generated from a property after deducting all operating expenses, but before financing costs and taxes. This figure is essential because it provides a clear picture of the property's profitability, which is crucial for investors looking to assess the potential return on their investment.

In the income approach, NOI is used in conjunction with the capitalization rate to arrive at the property value. The capitalization rate, which reflects the expected return on investment and the level of risk associated with the property, is applied to the NOI to determine the value of the property. Therefore, without accurately assessing NOI, the calculation of property value through the income approach would be flawed.

While gross income represents the total earnings from the property before any expenses are deducted, it does not factor in the costs associated with operating and maintaining the property. Market value, on the other hand, is a broader concept that can also be influenced by external factors beyond the income the property generates. Consequently, the focus on NOI as a central measure in the income approach aligns with the goal of determining the value based on the revenue potential and associated operating costs of the property.