In income capitalization, how is value measured?

In income capitalization, value is assessed by looking at the property’s ability to generate income over time. The correct choice highlights the focus on net operating income (NOI) combined with the expected reversion, which represents the property's value at the end of the income-producing period. This method is effective because it captures both the ongoing earnings from the property and the anticipated future value at the point of sale.

The net operating income is critical as it reflects the income generated after operating expenses are deducted but before financing costs. By incorporating the reversion, which is estimated based on market conditions and expected sale price at the end of the holding period, appraisers can arrive at a comprehensive valuation that considers both current income and anticipated future returns.

This approach aligns well with the income approach to valuation, where the focus is on the income-generating potential of a property, making it a fundamental aspect of the appraisal process for investment properties. Understanding this combination allows appraisers to present a valuation that is reflective of the property's financial performance and market conditions.