As one of the most important appraisal methods, value by income approach methods are used all over the world! They are suitable for all properties that are intended to generate income and for which the owners or potential buyers are primarily interested in the return on the invested capital. In Germany, the ImmoWertV standardizes three procedure methods: the general and the simplified value by income approach method as well as the method based on periodically varying income. In practice, other non-standardized methods are also used, e.g. the passive investment method (dt. Pachtwertverfahren) for hotel and nursing care properties.

The lecture will first explain the relevant legal norms and the financial mathematical principles of the value by income approach method. After a brief introduction to the “simplified appraisal procedures” widely used in practice, such as the direct capitalization procedure or the gross or net yield procedure, the main part of the lecture presents the three procedures standardized in the ImmoWertV, discusses them in detail and illustrates them with practical examples. An exercise will help (don’t forget your calculator!) you prepare for the final examination.