What type of deduction is used in the Building Residual Technique?

The Building Residual Technique is a real estate appraisal method that focuses on valuing the improvements on a property. This approach derives the value of the building by estimating the potential income it can generate, and then deducting the costs associated with the land and its development.

Using this technique, the net income from the property is calculated, taking into account what the land could generate as raw land alone. This deduction is vital because it allows the appraiser to isolate the income attributable specifically to the building improvements in order to determine their value accurately.

The other options reference various financial aspects that do not align with the Building Residual Technique's specific focus on separating the income generated by improvements from that of the raw land. The total operating expenses, a percentage of the appraised value, and the historical cost of improvements serve different purposes in appraisal methodologies but do not reflect the essential deduction used in this particular technique.