What defines the income approach to property valuation?

The income approach to property valuation is primarily defined by calculating value based on net earning power. This method focuses on the income-generating potential of the property, typically used for investment properties where rental income is the key factor. By analyzing the expected net income and applying a capitalization rate, appraisers can determine the present value of future cash flows that the property can generate. This approach helps investors and stakeholders understand the financial viability of a property by assessing its capacity to produce income.

The emphasis on net earning power distinguishes this approach from other methods, such as those relying on cost or market comparisons, as it isolates the revenue aspect essential for investment analysis. While the other options may pertain to different valuation methodologies, they do not reflect the fundamental aspect of the income approach, which is rooted in the property's performance as a source of income.