Property Valuation
The 'land residual technique' in the income approach is used when:
AA. The land value is known and the building value is estimated
BB. The building value is known and the land value is estimated from the residual income after returning building value✓ Correct
CC. Only raw land is being valued
DD. The building is new and has no depreciation
Explanation
The land residual technique is used to estimate land value when the building value is known (e.g.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Math Concepts
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