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21 Cards in this Set
- Front
- Back
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INCOME APPROACH
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PGI
-VACANCY & COLLECTIONS =EGI -ALL EXPENSES =NOI |
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EXCESS LAND
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Land or site that is not necessary to support the use of the existing improvements situated on the subject property. Can be sold separately
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SURPLUS LAND
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The portion over and above what is necessary for the highest & best use. Does not have stand-alone highest & best use. Cannot be sold separately
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4 METHODS OF DEPRECIATION
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AGE-LIFE METHOD
BREAKDOWN METHOD MARKET EXTRACTION METHOD MODIFIED AGE-LIFE METHOD |
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AGE-LIFE METHOD
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EFFECTIVE AGE DIVIDED BY ECONOMIC LIFE=
DEPRECIATION PERCENTAGE NEED TO KNOW VALUE, EA AND EL |
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BREAKDOWN METHOD
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COST OF AN ITEM * % OF REMAINING LIFE = AMOUNT OF DEPRECIATION
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MARKET EXTRACTION METHOD
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TOTAL MARKET VALUE - SITE VALUE = IMPROVEMENT CONTRIBUTION TO VALUE
REPLACEMENT COST NEW - IMPROVEMENT CONTRIBUTION = DEPRECIATION AMOUNT |
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MODIFIED EFFECTIVE AGE-LIFE AMOUNT
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1)Identify depreciation due to curable items
2)Cost to cure - cost new = Remaining cost new 3)EA/EL=dep % * Remaining Cost New = Incurable Dep 4)Cost to cure + incurable dep = total depreciation |
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FINAL COST APPROACH ANALYSIS
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Replacement Cost New
-Depreciation (Physical) +Site Value +Other Site Improvements =Indicated Value |
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Total Market Value
- (Replacement Cost New - Depreciation) = Site Value |
Replacement Cost New - Depreciation
+ Site Value = Total Market Value |
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HOW DO YOU CALCULATE INSURANCE VALUE
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Total Property Value
- Site/Land Value = Insurance Value Amount |
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AN APPRAISER IS USING THE DEPRECIATED COST OF THE IMPROVEMENTS AS A STEP IN DEVELOPING AN OPINION OF VALUE. WHICH LAND VALUATION METHOD IS THE APPRAISER USING?
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EXTRACTION METHOD
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5 METHODS OF VALUING THE SITE
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1) Sales Comparison Method
2) Allocation Method 3) Extraction Method 4) Land Residual method 5) Ground Rent Capitalization Method |
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SALES COMPARISON METHOD OF SITE VALUE
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Compares subject land or site to other similar sites that have recently sold. Adjustments are made to comps similar to sales comparison approach
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SEQUENCE OF ADJUSTMENTS
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1) Property Rights Conveyed
2) Financing Concessions 3) Terms of Sales 4) Location 5) Physical Features |
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ALLOCATION METHOD
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Site Value
--------------- Total Market Value = Allocation Ratio for Site |
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EXTRACTION METHOD
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Calculate Value of Improvements
Replacement Cost New -Depreciaton +Other Improvements=Value of Improvements Total Improved Value - Value of Improvement = Site Value |
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LAND RESIDUAL METHOD
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Attributes a certain part of the income produced by a property to the building or other improvements. The remaining income is attributed to the land
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GROUND RENT CAPITALIZATION METHOD
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Method of valuing land based on the income it generates in a given year and divided by an appropriate overall cap rate.
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GROUND RENT CAPITALIZATION METHOD
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Calculate Rate of Return: Net Income/Sales Price =Cap Rate
Apply Cap Rate to Subject Net Income: Income * Cap Rate = Value (IRV) |
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4 TESTS FOR HIGHEST & BEST USE
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1) Legally Permitted
2) Physically Possible 3) Economically Feasible 4) Most Profitable |
