To obtain the land income in the building residual method, one does what with the land capitalization rate?

In the building residual method, obtaining the land income involves utilizing the land capitalization rate in conjunction with the land value to determine the expected income the land can generate. By multiplying the land capitalization rate by the land value, you effectively calculate the anticipated income that the land alone would produce. This is rooted in the principle that the value of land reflects its ability to generate income over time.

The land capitalization rate is essentially a percentage that represents the expected return on investment for a piece of land; by applying this rate to the land value, you can ascertain the overall income generated. This approach is crucial for appraisers when determining the value of the land independently of any structures that may be present.

The other strategies listed do not accurately capture the relationship necessary to derive the land income. For example, adding the capitalization rate to the land value would yield an incorrect figure that doesn't reflect income generation. Dividing the land value by the capitalization rate might suggest a different financial notion, while subtracting it from the land value would not be relevant in the context of estimating income. Thus, the method of multiplying the land capitalization rate by the land value stands out as the correct approach for deriving the land income.