Which technique is used to determine the value of buildings when using residual income techniques?

The correct answer is focused on the concept of building residual as part of the residual income approach. In this context, the building residual technique is employed to determine the value of improvements made to the land, specifically focusing on the generate income through those improvements. The idea behind the building residual method is to assess how much value can be attributed to the building itself after accounting for the value of the land and its expected income.

In a residual analysis, the overall income generated by a property is estimated, and the necessary expenses, including land costs, are deducted to arrive at the portion of income attributable to the building. This distinction is key in understanding how much of the total income is produced specifically by the structures on the property.

The other concepts mentioned, such as land residual, cash flow analysis, and income capitalization, serve different purposes in appraisal and property valuation. Land residual focuses on determining the value of the land itself, while cash flow analysis involves a broader look at all inflows and outflows over time. Income capitalization, on the other hand, is a method that converts income into value based on a capitalization rate but does not specifically isolate the building's value in the same manner as the building residual approach does. Thus, understanding the specific focus on the building