The income approach is based on the present worth of future benefits.  When analyzing capitalization rates the assessor should consider expected future income.  The assessors should consider the class and specific quality and nature of the property.  Such things as age, state of repair, and location affect the risk associated with the property and the capitalization rate that should be applied.  Generally speaking, superior and/or newer properties have lower capitalization rates.

In general, favorable conditions should lower the capitalization rate and raise the value.  Negative or below average conditions should raise the capitalization rate and lower the value.  The following factors could affect the capitalization rate:

• number of rounds per year,
• competition, and expected changes in competition,
• location - urban or rural,
• course condition and design, and
• quality and age of clubhouse and other improvements.

The decision on whether property taxes should be included within the capitalization rate is an issue in some areas.  This guide recommends including the actual property taxes as an expense when calculating the net income for a property.