Income Approach
Learn about the income approach in Canadian real estate appraisal — what it is, when it’s used, and how it values income-producing properties.
August 08, 2025
What is an Income Approach?
The income approach is a property valuation method that estimates value based on the income the property is expected to generate.
Why an Income Approach Matters in Real Estate
In Canadian real estate appraisal, the income approach is commonly used for investment properties like rental buildings or commercial assets.
Key points:
- Calculates value by capitalizing net operating income (NOI)
- Requires accurate income and expense data
- Sensitive to changes in vacancy rates and market rents
Understanding the income approach helps investors evaluate potential returns and property values.
Example of an Income Approach in Action
The appraiser used the income approach to value the apartment complex by capitalizing its net operating income.
Key Takeaways
- Estimates property value based on income potential
- Common for rental and commercial properties
- Relies on accurate financial data
- Sensitive to market conditions and vacancy
- Useful for investment decision-making
Related Terms
- Net Operating Income
- Capitalization Rate
- Market Value
- Vacancy Rate
- Debt Coverage Ratio (DCR)
September residential sales, not seasonally adjusted; the annual comparison uses CREA’s revised figures. Chart: 
Annual changes in the unadjusted national MLS® HPI and average sale price. The average is affected by the mix of transactions. Chart: 
Seasonally adjusted residential months of inventory by province. Local property types can differ substantially. Chart: 
Ontario and B.C. are the two provinces with forecast annual average-price declines in 2026. Chart: 
Annual average transaction prices in Canadian dollars. Forecast values are not December price targets. Chart: 
Five-year changes in seasonally adjusted composite MLS® HPI benchmarks, September 2021 to September 2026. Chart: 
(Avison Young)
The Mason Suite Interior (Infinity Properties)
The Mason Suite Interior (Infinity Properties)
Rail District aerial (Infinity Properties)
Versant (Infinity Properties)