A building residual technique is a specific method or way of appraisal, where the income to land gets deducted from the net operating income, thereby leading to building income as a result. The building income is categorized into the building value as well.
The building residual technique is a method of capitalization where the land value is a known entity, and the residual income for the building/structural improvement is thereby capitalized for getting the improvement/building value. This technique comes into play when the land value is already known for the calculation procedure. The technique is used for getting the income to improvement figure. Both techniques are the same, i.e. land residual and building residual techniques.
The building residual technique or method comes handy in the real estate sector for appraisal purposes. It is a deduction for the property net income, and it works as the estimated income from any raw property or land. In this technique of appraisal, there is an amount (indicating the income to land aspect) which is deducted from a property net income. This is one of the most commonly-used techniques in the real estate sector.
