Residual Method  

Residual Method allows to estimate the maximum value, which the potential investor may pay for the real estate in its present condition in connection with the investment project envisaged for implementation.

Residual Method is implemented when determining the value of real estate which can be subject to development, expansion, modernization or other improvements. The value of the property can be specified solely for the land, for the land with its components before the improvements or for the land components separately. It is used in analyzing and preparing development projects for real estates. These situations usually require determining the value of individual components of the real estate, i.e. specifying the value of the land or building objects in the value of the real estate.

The value of the real estate is defined as the difference between the value the real estate will reach after the planned investment is implemented and the value of the costs ensuing from the project implementation (costs of construction, design and monitoring, costs of securing the financing and the anticipated developer’s profit). The remainder is the value of the property in its present condition, on the day of the appraisal.







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