What method of land valuation converts the amount of yearly income a site will produce into a value using a capitalization rate?

The method of land valuation that converts the amount of yearly income a site will produce into a value using a capitalization rate is known as ground rent capitalization. This technique is specifically designed to assess the value of income-producing properties by determining the net operating income (NOI) of the property and then applying a capitalization rate to that income. The capitalization rate reflects the risk associated with the investment and can vary based on market conditions, property type, and location.

In this context, ground rent capitalization is particularly useful for valuing rental properties or parcels of land that are leased out for a period of time. By calculating the expected income and dividing it by the capitalization rate, an investor can ascertain the value of the property based on its ability to generate income.

The other methods mentioned serve different purposes. For instance, the cost approach estimates value based on the cost to replace or reproduce the property, while the sales comparison method relies on analyzing comparable sales in the market to gauge value. The direct comparison method, often synonymous with the sales comparison approach, also evaluates property value based on similar property transactions but does not focus on income generation. Each of these methods has its own application and is suited for different types of properties and valuation circumstances.