Which method estimates site value based on the rental income an improved site can generate?

The ground rent capitalization method is specifically designed to estimate the value of a site by analyzing the rental income it can produce. This approach operates on the principle that the value of a property can be determined by the income it generates from being leased or rented out.

In this method, appraisers capitalize the estimated rental income into a present value using a capitalization rate, which reflects the relationship between the income generated from the property and its overall value. This technique is especially useful for assessing properties where lease or rental income is a significant factor, such as commercial properties.

The other methods mentioned have different focuses and methodologies. For instance, the allocation method typically divides the total property value among its various components, while the subdivision development method assesses value based on potential development and sales within a subdivided area. The market extraction method estimates value through analyzing sales data of similar properties and determining the proportion attributed to land versus improvements. These distinctions emphasize why the ground rent capitalization method is the appropriate choice for estimating site value based on rental income.