Valuation approaches

The 3 internationally defined valuation approaches are the market approach, the income approach and the cost approach. These valuation approaches are easily identified from their basic principles:

• The market approach equates to the comparison method of valuation.
• The income approach generally refers to the investment method – either traditional (cap rate) or discounted cash flow (DCF) - or can refer to the profits method.
• The cost approach is often taken to refer to the depreciated cost method of valuation but can equally be applied to use of the residual method for valuing properties with development potential.