Which factor is NOT included when determining the building capitalization rate?

When determining the building capitalization rate, various financial considerations come into play to assess the expected return on an investment property. The capitalization rate itself is a metric used to evaluate the profitability of real estate investments.

The recapture rate reflects the portion of the investment that needs to be recaptured over time to maintain the investment's value. The effective tax rate factors in the property taxes that affect the net operating income and ultimately influence the value of the property. The discount rate, on the other hand, is related to the time value of money and helps in understanding how future cash flows are perceived in today's terms.

In contrast, the income tax rate is not typically included directly when calculating the capitalization rate. The cap rate primarily focuses on the income generated by the property in relation to its value, independent of the income tax considerations of the investor. Therefore, while the income tax rate may affect an investor's overall return, it does not play a direct role in the calculation of the capitalization rate for the building itself. This distinction underscores why the income tax rate is not part of the factors that contribute to determining the building capitalization rate.