Understanding Direct Real Estate Investment

Emily is considering investing in a direct real estate opportunity. She is evaluating a residential property located in a suburban area that has shown consistent rent growth over the past five years. The property requires some renovations but is considered a good long-term investment due to its location and growth potential.

In her assessment, Emily has encountered information regarding the Income Approach to valuing real estate investments. This approach focuses on the income-producing potential of the property and uses metrics such as capitalization rate and net operating income (NOI) to determine its value.

Given this context, which of the following statements correctly describes an aspect of direct investment in real estate?