What is it?
The income approach values a property on the idea that its value is tied directly to the income it produces. MPAC explains that the market value of an income-producing property is tied directly to its ability to generate revenue.
An appraiser analyzes the building’s revenue and expenses and converts that income into a present value. The most common calculation is net operating income (NOI) divided by the cap rate.
Where does it fit among the three methods?
- Direct comparison: compare recent sales of similar properties. Often used for vacant land, condo units and buildings for your own use.
- Income approach: value from income. Often used for offices, shops, apartment buildings and rented industrial buildings.
- Cost approach: the cost to rebuild, minus wear and age, plus the land. Used for unusual buildings that rarely sell.
What to watch out for
If the income figure is wrong or the wrong cap rate is chosen, the value is far off. The cap rate changes with timing and the market, so do not use old numbers as they are. A bank or a legal purpose may need a report from a qualified appraiser.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
An income-producing property’s market value is tied directly to its ability to generate revenue.In plain wordsThe market value of an income-producing property is tied directly to its ability to produce income.
Source: mpac.ca/en/UnderstandingYourAssessment/ThreeApproachesValue · checked Oct 30, 2026
Through the Income Approach, the appraiser analyzes a property’s revenue and expenses to convert the income into a present value.In plain wordsThe appraiser analyzes the property’s revenue and expenses and converts the income into a present value.
Source: aicanada.ca/need-an-appraiser/what-appraisers-do/ · checked Oct 30, 2026
Common questions
Is a home valued by the income approach too?
Usually not. The AIC explains that the income approach is used mainly for income-producing investment property and is typically not applied to a residential property. A home is valued mostly by comparing sales of similar homes.
Is an MPAC assessment the same as market value?
No. An MPAC assessment is for property tax and is the value on a set valuation date. Even if the method has the same name, it is not the same as setting a price the property would sell for.
Guides that use this term
Sources checked
- MPAC, Three Approaches to Value · checked Oct 30, 2026
- AIC, What Appraisers Do · checked Oct 30, 2026