The income capitalization approach to appraisal uses ______ as the I in the capitalization formula V = I ÷ R.

The income capitalization approach to appraisal focuses on the income-producing potential of a property. In this context, the term "I" in the capitalization formula ( V = I ÷ R ) stands for net operating income (NOI).

Net operating income represents the total revenue generated from a property, minus the operating expenses necessary to maintain it. This figure is crucial in the capitalization approach because it provides a clear picture of the property's profitability and its ability to generate income over time. By using NOI, appraisers can effectively determine the property’s value based on its income-producing capability when divided by the capitalization rate (R).

The other terms, while related to income or valuation, do not accurately represent the concept of "I" in this specific formula. For example, net present value indicates the current worth of future income flows, which is different from the required operating net income. Annualized income refers to converting income to a yearly figure but does not specifically represent the net operating income. Gross rental income does not account for expenses and thus does not reflect the property's actual profitability necessary for the capitalization process.