The income approach to valuation relies on which of the following concepts?

The income approach to valuation relies on the concept of anticipation, which underscores the importance of expected future benefits derived from an investment. This method operates on the premise that the value of a property is determined by the income it can generate over time. Appraisers project future income streams—like rent or profits—and discount them to reflect present value, considering factors such as risk and time value of money.

In employing this approach, appraisers focus on how potential changes in occupancy rates, rental duration, and operating expenses can affect future income, ultimately guiding investors in making informed purchasing or selling decisions. By incorporating the anticipation of future economic benefits, this method aligns closely with investment principles, distinguishing it from other valuation approaches that may emphasize historical costs or current market conditions without factoring in income generation potential.