Which formula would you use to determine economic obsolescence?

To determine economic obsolescence, the correct approach is to analyze the impact of external economic factors on the property's income potential. The formula that effectively captures this relationship is based on comparing the rental income of comparable properties to the subject property, which is reflected in the choice that involves comparative rent.

Using comparative rent divided by subject rent, and then applying the gross rent multiplier (GRM), enables an evaluator to gauge how external factors might be diminishing the potential income of the subject property compared to others in a similar market context. The GRM serves as a valuable metric that translates rental income into a property value context, making it suitable for assessing the overall economic impact on the subject property.

This formula allows for a nuanced understanding of how market conditions and economic trends affect property values, specifically through the lens of rent. By utilizing this method, appraisers can effectively quantify the degree of economic obsolescence that may be present, thus providing better insights into valuation adjustments and potential investment decisions.