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CABARRUS COUNTY 2012 APPRAISAL MANUAL Discount Rate Remaining Economic Life Straight Line Capital Recovery (Straight Line Capital Recovery assumes a declining income stream and may be appropriate when short term leases or economic rent figures are utilized.) Net Operating Income Less annual income allocated to site capitalized at the DISCOUNT RATE ($30,000 X.10) Plus CAPITAL RECOVERY RATE ((.02) = .12) $12,000/12) _ Plus current Land Value Straight Line Building Residual Technique BUILDING RESIDUAL TECHNIQUE - LEVEL ANNUITY 10% 50 years 1/50 = 2 $15,000 $100,000 $ 30,000 $130,000 Again, when contract rent is applicable (long term lease with prime tenants) the level annuity technique should be used as follows: Net Operating Income Less annual income allocated to land Equals income allocated to improvements Present worth of Improvements equals Annual Income allocated to building capitalized at the capitalization rate: (i.e. $12,000/.100857) _ Plus current land value Level Annuity Building Residual Technique PROPERTY RESIDUAL LEVEL ANNUITY $15,000 -$3,000 $12,000 $118,980 $ 30,000 $148,980 When total property income is difficult to allocate to either land or building, as in the case where building improvements are old, and where there is doubt about the land value because of location and specialized character, the property appraiser may want to use the property residual technique. Net Annual Income is capitalized over the remaining economic life of the property. To this must be added the projected value of the land at the end of the property's expected economic life discounted at the appropriate rate. PASCO allows the appraiser to compensate for expected growth trends in land values by entering an annual land growth rate. However, for properties with relatively long remaining economic lives, the difference is Cabarrus County — 2012 Revaluation INCOME PROPERTY VALUATION 8- 11 05/24/01 Attachment number 9 G -6 Page 282