An appraiser is using the direct capitalization method to calculate a value for an investment property. Which of the following is true?

The direct capitalization method is grounded in the principle that the value of an investment property is determined by its ability to generate income. When an appraiser applies this method, they focus on converting the net operating income (NOI) expected from the property for a specific year into a market value. This is primarily achieved by applying a capitalization rate to that single year of income.

The key aspect of this approach is its reliance on current income rather than future projections or anticipated market changes. This means that while other income potential or future value might be considered in broader assessments, the direct capitalization method will simplify the process by focusing on a present snapshot of income performance. Therefore, the statement about converting a single year's expected income into market value accurately reflects the core function of this valuation method.