The Income capitalization approach is one of the three major property valuation methodologies. Two techniques can be used in applying this approach: 1) the direct capitalization technique, which is simpler, and 2) the more sophisticated one that involves the use of the discounted cash flow model.

income capitalization approach will be emphasized in this chapter. In jurisdictions where ad valorem taxes are based on market value of real estate, hotel owners are concerned with separately estimating the real property component (real estate) and the personal property component (both tangible and intangible personal The income capitalization approach to appraisal assigns a property value based on the estimated returns of a property. The appraisal determines the market value of a property.