A reconstructed operating statement is used primarily in which approach?

The use of a reconstructed operating statement is closely associated with the income approach to valuation, so it is essential to understand the context of this approach in real estate appraisal. The income approach focuses on determining the value of a property based on the income it generates. This is particularly relevant for investment properties, where the potential income can significantly influence the property's market value.

A reconstructed operating statement provides detailed insights into a property's income and expense structure. By assembling this data, appraisers can analyze the net operating income (NOI) of the property, which is a critical factor in calculating its value using capitalization rates. The capitalization approach relies on this income data to convert the anticipated future income into a present value, thereby allowing for a coherent assessment of the investment's worth.

The reconstructed operating statement effectively helps appraisers make informed assumptions about the property's performance and ensures a thorough analysis of various income-producing factors. This meticulous documentation supports stronger valuation conclusions within the income approach compared to other methods, where such detailed operational data may not be as significant.