Explain the concept of "going concern" in real estate valuation.

The concept of "going concern" in real estate valuation specifically refers to the assessment of a business property based on its ongoing operations and the income potential it generates. This approach recognizes that certain properties, particularly those used for commercial purposes, have value not just from the physical assets involved, but also from the ability of the business to produce revenue over time.

In a going concern valuation, the appraiser takes into account the operational aspects, such as tenant leases, occupancy rates, and income streams associated with the property. This method is particularly relevant for properties like hotels, restaurants, and retail spaces, where the value is significantly influenced by the income generated by the business activities rather than merely the physical structure itself.

This approach contrasts with purely physical or market-based evaluations, which do not consider the operational effectiveness of the property in generating income. Understanding the going concern valuation is essential for real estate professionals who deal with commercial properties, as it provides a more comprehensive perspective on how to assess value in relation to potential profitability and long-term sustainability of the business activities conducted on the property.