Property Valuation
What is a 'land residual' in real estate investment analysis?
ALeftover land after a subdivision
BThe portion of net operating income attributable to the land after deducting the return on building improvements✓ Correct
CUndeveloped land at the edge of a project
DLand that cannot be developed due to environmental restrictions
Explanation
In investment analysis, the land residual technique allocates income between land and improvements. The income attributable to improvements is deducted first (based on their value × required return), and the remainder (the residual) is attributed to the land.
Related California Property Valuation Questions
- What is 'regression' as an appraisal principle?
- Under the principle of conformity, property values are maximized when:
- What is 'highest and best use' in real estate?
- What is the standard appraisal form used for a single-family residential property in a federally related mortgage transaction?
- An appraiser values a property using the sales comparison approach and finds that a comparable property has a swimming pool worth $15,000 but the subject property does not. What adjustment does the appraiser make?
- The 'highest and best use' of a property is defined as the use that is:
- Net Operating Income (NOI) is calculated as:
- When adjusting a comparable sale in the sales comparison approach, an appraiser ADDS value to the comparable when the comparable is:
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