Golf courses are similar to many other commercial properties in that they are bought and sold based on their ability to generate income.  When sufficient market data is available to establish economic rates the Income Approach can provide a reliable indication of value.  To apply an Income Approach, a stabilized economic gross income estimate is established from which stabilized economic operating expenses are deducted to arrive at a net income.  The net income is then capitalized at an appropriate rate to arrive at an estimate of value.

The net income estimate is based on analyzing market data and any available operating statements for the subject property.  This provides a basis for an estimate of the net income that the property will produce in a typical year under ordinary and prudent management.

The Income Approach works best when sufficient data has been collected from a number of golf courses thereby allowing the assessor to accurately establish the economic rates and ratios required for application of the approach.  The type of golf course ownership can determine the suitability of the information provided for analysis.  Some golf courses are operated on a break even basis, not to make a profit; therefore the income information provided is likely not suitable for developing economic rates.

The production of economic rates and ratios enables the valuation of not-for-profit and private courses.  The resulting “hypothetical” valuation, based on economic data, will provide a value to any owner, not one particular owner, which is fundamental in assessment valuation.

In Section 4.0 Data Collection, several forms provided with this guide were referenced that were developed to assist the assessor in data collection.  Form GCRF1 asks the course owner or manager for the most recent financial statements and current green and membership fees.  Detailed income and expense information that allows the assessor to accurately categorize revenue and expenses is vital to the successful application of the Income Approach.  The assessor should follow up with the golf course owner or manager all information lacking the sufficient detail required for analysis.