What is the value of the building, using the building residual technique?

To understand the value of the building using the building residual technique, it is essential to recognize what this method entails. The building residual technique is a valuation approach primarily used for income-generating properties. It separates the value of the land from the total property value to derive the value of the building itself.

In applying this technique, key variables are considered, including the projected income the property generates and the capitalization rate that reflects the risk and return expected from that income. Once the income attributable to the land is determined and subtracted from the total property value, the remaining value is assigned to the building.

When the answer indicates a value of $75,000, this suggests that after calculating the expected return from the land and the overall market conditions, the value assigned to the building through this methodology is precisely that amount. This conclusion aligns with the valuation principles guiding the building residual technique, where the residual value represents the expected return from the property after accounting for land value.

Typically, values like $100,000, $125,000, and $130,000 would suggest either a higher estimation of the building's contribution or an unaccounted title factor not present in the effective analysis based on income and market conditions. Thus, $75,000 accurately