What is the primary use of the income capitalization approach in appraisal?

The primary use of the income capitalization approach in appraisal is to assess the potential income generated by a property and evaluate its investment potential. This method is particularly relevant for income-producing properties such as commercial real estate, rental properties, and multifamily housing. By analyzing the expected income stream and applying appropriate capitalization rates, appraisers can determine the property's value based on its ability to generate future cash flows.

This approach allows investors and stakeholders to make informed decisions regarding their investments, as it provides insights into the financial viability of a property. Understanding the potential return on investment is critical for buyers and investors looking to optimize their portfolios or make strategic acquisitions.

The other options, such as estimating physical depreciation, determining rental income, and calculating tax assessments, may involve aspects of property valuation but do not encapsulate the primary focus of the income capitalization approach, which concentrates on the overall investment potential and the value derived from income generation.