What is the formula for calculating income attributable to the land?

The formula for calculating income attributable to the land is derived from the relationship between the value of the land and the income it generates. The correct approach involves multiplying the value of the land by the capitalization rate associated with that land.

When you multiply the land's value by its corresponding rate, you are effectively determining how much income the property is expected to generate based on its value and the prevailing market rate of return. This is a crucial aspect of the income approach to appraisal, where the future income stream is used to evaluate the value of real estate.

Using this method, appraisers can assess what investors would realistically expect to earn from the investment in the land. This calculation directly connects the intrinsic value of the property to its potential earning capacity, helping to establish a more accurate and fair market value.