What type of properties would likely be assessed using the income capitalization approach?

The income capitalization approach is primarily applied to properties that generate income, such as commercial properties. This method estimates the value of a property based on the income it produces, factoring in potential income streams, operating expenses, and the capitalization rate, which reflects the return on investment expected by investors.

Commercial properties, such as office buildings, shopping centers, apartment complexes, and hotels, are designed to generate rental income. Therefore, investors are primarily concerned with how much money the property can generate, making it appropriate to use the income capitalization approach in assessing their value.

In contrast, single-family homes and luxury estates are typically valued using comparative market analysis or other methods that focus more on sales data and market conditions rather than income potential. Vacant land is often assessed based on its potential development value or market comparables, rather than generated income, which is a key component of the income capitalization approach. Thus, commercial properties are the most suitable candidates for assessment using this valuation method.