What is the value of the land using the ground rent capitalization approach if the income is $150,000 a year with a capitalization rate of 10%?

To determine the value of the land using the ground rent capitalization approach, you can use the formula:

Value = Income / Capitalization Rate.

In this case, the income is $150,000 per year and the capitalization rate is 10%.

When you apply the formula:

Value = $150,000 / 0.10.

This calculation simplifies to:

Value = $150,000 / 0.10 = $1,500,000.

This means the value of the land is $1.5 million.

The ground rent capitalization approach is effective here because it focuses on the potential income generated by the property, allowing for the determination of the land's value based on its earning potential. This method is particularly relevant in real estate appraisal as it directly links income generation to property valuation.