In the net income model, what does V represent in the equation V = I ÷ R?

In the net income model, the equation V = I ÷ R is utilized to determine the market value of an income-producing property. In this equation, V stands for Market Value.

The formula illustrates the relationship between the income generated by a property, represented by I (Net Operating Income), and the overall capitalization rate, denoted by R. By dividing the net income by the capitalization rate, investors and appraisers can derive the market value of the property. This distinct relationship emphasizes how the value of a property is influenced by its income-generating potential and the rate of return that investors require for their investment risk.

Understanding this equation is crucial for real estate professionals engaged in mass appraisal and property valuation, as it enables them to estimate the value of various properties based on their income metrics and the prevailing market conditions.