What approach analyzes a property's potential to generate future income?

The income capitalization approach is specifically designed to evaluate a property's ability to generate future income, making it the correct choice in this case. This method focuses on estimating the value of a property based on the income it is expected to produce, typically assessed over a specified period, often using net operating income. The income generated from the property is capitalized to determine the present value based on an expected rate of return. This approach is particularly useful for investment properties, such as apartment buildings or commercial real estate, where income generation is a primary concern for buyers and investors.

In contrast, the cost approach is centered on the cost to replace or reproduce a property, factoring in depreciation; the sales comparison approach assesses value through recent sales data of comparable properties; and the market valuation approach is more general and can incorporate various methods of property valuation but may not specifically hone in on income potential.