What is the goal of using the yield capitalization method in real estate analysis?

The yield capitalization method is a valuation technique employed primarily to assess the value of income-producing properties. This approach is based on the principle that the value of a property is derived from the income it generates over time. By estimating future income streams and applying a capitalization rate—reflecting the risk and expected returns—appraisers can determine the present value of those anticipated cash flows.

This method is particularly useful for investors and property managers, as it allows them to analyze the potential profitability of real estate investments. It also facilitates comparisons between similar properties and helps stakeholders make informed decisions about property acquisition or development based on expected returns.

In contrast, other choices such as increasing taxation, determining land use classifications, or establishing rental agreements are not the primary objectives of the yield capitalization method. These alternatives pertain to different areas of real estate management and assessment and do not focus on directly measuring the financial value of a property from its income-producing capabilities.