Income Capitalization Approach Appraisal

First is the net operating income or noi which refers to a property s income after all.

Income capitalization approach appraisal. This approach to value is best suited for income generating properties that has adequate market data because it is meant to reflect the behaviors and expectation of participant of typical market. Income capitalization approach as we have mentioned is one of the three main methods used by real estate appraisers and real estate investors to estimate the value of an investment property. This method converts the income of a property into an estimate of its value. Specifically the income capitalization approach uses two variables to determine a property s market value.

The income capitalization approach is the approach which is applied to determine the value of an investment or commercial property. Therefore it is a way of turning the property s income into value. It is based on the expectation of future benefits. In essence it focuses on the income the investment property produces.

Income capitalization is a valuation method that appraisers and real estate investors use to estimate the value of income producing real estate. A method that will be covered on the real estate license exam for appraising real estate based on its income is known as the income capitalization approach.