A WA valuer is using the residual (hypothetical development) method to value a development site. Which of the following is NOT a component of this method?
Correct Answer
C) The capitalised net rental income from the buildings now on the site
The residual method calculates land value by deducting all development costs (construction, fees, finance, marketing) and developer's profit from the estimated gross realisation of the completed project. The capitalised net rental income of existing improvements is not a component — it belongs to the income capitalisation method.
Why This Is the Correct Answer
The residual method works from the completed development's value down to land value; the income from existing buildings belongs to the capitalisation method, not this one.
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