Which approach is most relied upon for estimating the value of a 20-unit apartment building?

The income approach is primarily used for estimating the value of income-producing properties, such as a 20-unit apartment building. This method focuses on the potential income that the property can generate, which is crucial for investors who want to assess the return on their investment.

In the income approach, an appraiser typically calculates the net operating income (NOI) by deducting operating expenses from the property’s gross income. This NOI is then capitalized using a suitable capitalization rate to arrive at the property’s value. The appeal of this approach lies in its direct correlation with what investors care about when purchasing rental properties—the cash flow they can expect to receive.

The market and sales comparison approaches, while useful, are generally more applicable when valuing single-family homes or properties where comparable sales data is abundant. The cost approach might be considered in certain scenarios, like when determining the value of a new property or special use property, but it's less effective for income-producing multi-family properties, where the income generation is the primary concern. Therefore, the income approach is the most appropriate method for valuing a 20-unit apartment building.