With the discounted earnings method, the market value of rented residential and commercial properties is determined, which are intended to generate income. The owner intends to generate and generate the highest possible return with the property.
Primarily in the capitalized earnings method is not the value of the property per se, but the highest income from the property. If you compare a standard house in a well-known residential area with high rents, with a high-quality apartment building in a poor residential area, the difference will quickly become clear.
Therefore, the calculated real value of the property is only indirectly included in the income value calculation. For this reason, the value of the property is also determined separately from the real estate value using the income approach, since a residential or commercial property has a limited remaining useful life, during which the property does not lose value. In the context of the capitalized earnings method, real estate is exclusively capital investments or apartment buildings from which income can be derived.