When using residual income techniques with a known land value, which technique is used to determine the value of the building(s)?

The building residual technique is specifically designed to assess the value of the improvements (such as buildings) once the value of the land has already been established. In this approach, the income generated by the property is determined, from which the land value is subtracted. This allows the appraiser to isolate the income attributable solely to the building(s).

By utilizing this technique within the context of residual income analysis, appraisers can accurately derive the value of the structures themselves based on the income they produce, making it an essential method when land values are known. The direct relationship between the income generated and the costs associated with the building provides a clear and concrete way to assess its value. This leads to a reliable estimation that reflects the operational profitability of the building compared to the overall property performance.

Other techniques listed, such as the annuity method and yield capitalization, serve different purposes in the appraisal process. The annuity method typically focuses on consistent income over time, while yield capitalization assesses present value based on expected future income. The land residual technique, on the other hand, specifically deals with understanding the income associated with land itself rather than the improvements. The building residual technique is uniquely positioned to fulfill the need for identifying the building's value in scenarios where land value is