In the land residual technique, income attributable to the land is found by:

Correct Answer

A) Deducting the income attributable to the improvements from NOI

Why this is correct: In the land residual technique, income attributable to the land is found by deducting the income attributable to the improvements from NOI. First, the building's income is calculated (building value * building capitalization rate). The remainder of the Net Operating Income (NOI) is residual income to the land, which is then capitalized. Why the other choices are wrong: Dividing total NOI by the number of acres is an allocation, not a residual technique. Multiplying the building's value by the land capitalization rate incorrectly mixes components. Subtracting the site's property taxes from gross income is not part of the residual income calculation. Exam tip: The technique allocates income to the building first; the leftover 'residual' is for the land.