Which term describes the process of adjusting the income generated by a property for valuation purposes?

The term that describes the process of adjusting the income generated by a property for valuation purposes is capitalization. This process involves converting the expected future income from a property into a present value. By applying a capitalization rate to the net operating income (NOI) of a property, investors and appraisers can estimate what the property is worth based on its income-generating potential. This method is widely used in real estate to assess the investment value of rental properties.

Capitalization assists in determining how much a potential buyer might be willing to pay for a property based on its capacity to produce income, making it a fundamental concept in real estate investment analysis. It combines the income approach to valuation with the desired rate of return, resulting in a tangible assessment of value tied directly to the property's performance.