BC 2011 10 17 Regular Meeting - Laserfiche WebLink

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October 17, 2011 (Regular Meeting) Page 746 INCOME PROPERTY VALUATION BASIC STEPS IN INCOME APPRAISING In order to simplify the understanding of the basic steps of income appraising, we have briefly outlined them here before taking a more in depth look at each step. STEP I Estimate Gross Annual Income A. Determine type of rental unit (i.e. per apt., pr s.f., etc.) B. Calculate other income (i.e. parking fees, etc.) C. Identify vacancy and collection loss STEP II Identify Operating Expenses A. Fixed Expenses (Taxes and Insurance) B. Variable Expenses C. Repairs and Replacements D. Sources of Operating Expense Data STEP III Net Operating Income STEP IV Determine Income Projection Period A. Remaining Economic Life B. Investment Holding Period STEP V Determine Discount Rate; Select Method of Rate Estimation A. Band of Investment B. Built -Up STEP VI Identify Method of Depreciation A. Straight Line B. Level Annuity STEP VII Identify Method of Capitalization to use A. Land Residual Straight Line B. Land Residual Level Annuity C. Building Residual Straight Line D. Building Residual Level Annuity E. Property Residual Level Annuity F. Equity - Ellwood G. Gross Income Multiplier ESTIMATED GROSS ANNUAL INCOME The primary measure of a commercial property's worth is the amount of income which a property can earn or command in the local market. Therefore, it is important to derive a good understanding of the rental income that the space would command on the open market. The basic question which needs to be answered is, "What is the current market rent of the subject properties ". The gross income is what the property will produce over a period of one year or a term of a lease. It is defined as the total amount of revenue a property is capable of producing prior to the deduction for vacancy and expenses. ESTIMATED GROSS ANNUAL MARKET RENTS BY IMPROVEMENT TYPES Improvement types 60 - 63 Apartments - Generally the market rent for apartment complexes is determined by their monthly rent per unit. The total square feet of a unit included into the monthly rent gives you a monthly square foot rate. To determine the annual rent of the entire complex you simply add up the yearly rent of each unit type. COMMERCIAL / INDUSTRIAL Improvement types used with Model 07 - Generally your commercial, retail outlets will rent from $3.00 to $28.00 per square foot depending on the location, age and use of the retail outlet.