Three approaches to value
There are three ways to determine the value of anything, and each plays a part in property appraisal.
Cost Approach: This method determines how much it would cost to replace, that is, rebuild, the property, minus "accrued depreciation," that is, depreciation that has occurred since the property actually was built.
Income Approach: The third approach to value is called the income approach. Some properties generate income for their owners, the most obvious examples being rental properties, such as apartment buildings, non owner-occupied houses, duplexes, and the like. The rental income an owner might reasonably expect from a property is part of its value.