Which formula is used to calculate the land income in relation to building income?

Which formula is used to calculate the land income in relation to building income?

• A. NOI plus income of building
• B. NOI minus income of building
• C. Income of building divided by land value
• D. Income of building multiplied by cap rate

Answer: (B)

To calculate the land income in relation to building income, the appropriate method involves determining how much of the total income is attributable to the land versus the building. By subtracting the income generated from the building from the overall net operating income (NOI), you isolate the income stream that is specifically generated from the land itself. This approach helps in comparing the value contribution of land to that of the building. By using this method, appraisers can obtain a clearer understanding of how much income the parcel of land is producing independently of the structures on it, which is crucial for assessments related to land value versus property value. Understanding land income is an important aspect for appraisers when they analyze investments, assess different property types, or determine the economic viability of real estate development projects.

To calculate the land income in relation to building income, the appropriate method involves determining how much of the total income is attributable to the land versus the building. By subtracting the income generated from the building from the overall net operating income (NOI), you isolate the income stream that is specifically generated from the land itself.

This approach helps in comparing the value contribution of land to that of the building. By using this method, appraisers can obtain a clearer understanding of how much income the parcel of land is producing independently of the structures on it, which is crucial for assessments related to land value versus property value.

Understanding land income is an important aspect for appraisers when they analyze investments, assess different property types, or determine the economic viability of real estate development projects.