What is the land cap rate (Rl) used to convert?

The land cap rate (Rl) is used to convert annual land income into land value, reflecting the relationship between the income generated from a parcel of land and its overall market value. This rate allows assessors to estimate what an investor would be willing to pay for the land based on the income it produces. By applying the cap rate to the annual income from the land, you obtain an estimate of the land's value, facilitating the appraisal process.

This process is crucial for determining the fair market value of land and aiding in property tax assessments. The concept of the cap rate stems from income capitalization, where the value of an investment is derived from its ability to generate income. In this context, the land cap rate directly links the revenue generated by the land to its value, making it a vital tool for certified tax assessors.