Which type of property condition is typically examined when determining rental value differences in a capitalized value approach?

When determining rental value differences using a capitalized value approach, the examination of physical defects is crucial. This method involves evaluating how physical conditions of the property, such as structural issues, maintenance needs, and overall physical appearance, affect the property's desirability and, consequently, its rental value.

Physical defects can significantly influence the income potential of a property. A well-maintained property with no defects is likely to attract higher rents compared to one that has significant maintenance issues or structural problems. Appraisers must assess these physical aspects to make accurate calculations regarding the property's value and income generation capabilities.

While other factors like market demand, location advantages, and neighborhood trends play roles in determining overall property value, they are not as directly tied to the specific physical condition of the property itself as physical defects are. Thus, focusing on physical defects provides a more concrete basis for evaluating how the condition of the property impacts its rental value during the capitalization process.