Which formula correctly represents property valuation through income capitalization?

The correct formula for property valuation through income capitalization is represented by the expression V = I/R. In this formula, "V" stands for the value of the property, "I" represents the net operating income the property generates, and "R" is the capitalization rate, which reflects the investor’s required return on investment for that property.

This formula is foundational in real estate appraisal, especially for income-producing properties. It establishes the relationship between the income generated by the property and the capitalization rate, allowing appraisers to estimate the value based on expected income. By dividing the income by the capitalization rate, appraisers can determine the value that an investor would be willing to pay for the property based on its revenue-generating potential.

Understanding this formula is crucial for appraisers since it integrates key concepts of market return expectations and property income potential into a clear valuation methodology, making it a vital tool in real estate appraisal practices.