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
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.