What is the Land Residual Technique used for?

The Land Residual Technique is primarily utilized for estimating land value using net operating income. This method operates on the premise that the value of the land can be determined by assessing the income that the property generates after accounting for all improvements and expenses associated with the property. By deducting the estimated return on improvements from the overall net operating income, the remaining figure is attributed to the land itself. This technique is especially useful in valuation contexts where the land is expected to contribute significantly to the income produced by a property, making it a vital tool in the appraisal process for income-producing properties.

The approach helps appraisers isolate the component of value that is attributable solely to the land, which is key in assessing investment potential and market trends in real estate.