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Income Capitalization Approach To Value <br />The Income Capitalization Approach to value consists of methods, techniques, and mathematical <br />procedures that an appraiser uses to analyze a property's capacity to generate benefits (i.e., usually the <br />monetary benefits of periodic income and reversion from a future sale) and convert these benefits into an <br />indication of present value.36 This conversion can be accomplished in two ways. One year's income <br />expectancy can be capitalized ata market derived capitalization rate or at a capitalization rate that reflects <br />a specified income pattern, return on investment, and change in the value of the investment. Alternatively, <br />the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate. <br />The application of the Income Capitalization Approach to the subject is done in three basic steps, <br />including: <br />Projection of the gross income; <br />2) Projection of typical expenses to obtain the net income; <br />3) Capitalization of the net income into an indication of value. <br />The Income Approach is not applicable in the appraisal of the subject property because the subject is not <br />improved <br />1'. BRAMAN&CO, INC. -Rcnl IisW(c Appmisals& Consullina www. cpt ).mm <br />