Direct answer
What does Income capitalization approach mean?
A valuation approach that converts a property's income expectations into an indication of value.
Exam cue: Use market-supported income, vacancy, expenses and a capitalization method appropriate to the question.
What does it look like in a question?
New York example
An investor analyzes stabilized NOI and a market cap rate for an apartment property.
Common exam trap
What should you not confuse it with?
Gross income is not NOI, and financing costs are not operating expenses in the standard formula.
Related valuation terms
AppraisalAn opinion of value developed by a qualified appraiser for an identified use, property interest and effective date.CapitalizationThe process of converting income into an indication of value.ComparableA property used as market evidence because it is sufficiently similar to the property being analyzed.Comparative market analysisA broker's analysis of relevant market data to help a seller or buyer consider a probable price range.Cost approachA valuation approach that adds land value to the depreciated cost of the improvements.DepreciationA loss in property value from physical deterioration, functional obsolescence or external obsolescence in appraisal.
Sources used2 references with section locators
The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.
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