How many years of income does yield capitalization analyze?

Yield capitalization analyzes the income generated by a property over several years, typically focusing on a time horizon that provides a more comprehensive view of the investment's potential returns. This method is used to determine the present value of expected future cash flows, which often includes rental income or other forms of revenue the property may generate.

By evaluating multiple years of income rather than just a single year, yield capitalization accounts for fluctuations in annual cash flows, potential growth in income, and changes in market conditions. Analyzing several years of income allows appraisers to create a more accurate and reliable projection of the property’s value. This approach is particularly important in real estate, where income can vary due to seasonal business cycles or changes in local economic conditions.

Focusing solely on one year may not provide an accurate representation of the property's long-term performance. Similarly, considering a very specific number of years, like two or an arbitrary high number like 50, would generally not encompass the complete analysis typically done in yield capitalization. Therefore, looking at several years provides a well-rounded understanding of income stability and growth prospects for the property being appraised.