Commercial Property Three Approaches to Value
Description: Commercial Property Three Approaches to Value Market Approach (Sales) Cost Approach Income Approach Market Approach Uses comparable sales to determine value Sources MLS Subscriptions Sales Contracts Fee Appraisals Fewer commercial sales
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slide1. Commercial
Property<br>
slide2. Three Approaches to Value Market Approach (Sales)
Cost Approach
Income Approach<br>
slide3. Market Approach Uses comparable sales to determine value
Sources
MLS
Subscriptions
Sales Contracts
Fee Appraisals Fewer commercial sales available and many different commercial property types<br>
slide4. Cost Approach Uses replacement cost, depreciation, and land values to determine value
Sources:
Construction contracts
Marshall & Swift and other cost manuals
Local builders
Calculate replacement cost of buildings (RCN), subtract depreciation to get depreciated cost (RCNLD), add land value to determine total property value<br>
slide5. Income Approach Uses income & expense information to determine value
Sources
Rent rolls
Profit & loss statements
Tax Returns
Subscriptions
Advertisements
Calculate a net operating income (NOI) using market rents and typical expenses, capitalize the income to determine value<br>
slide6. Income Approach “The income approach is the most appropriate method in valuing commercial and industrial property if sufficient income data are available. Direct Sales comparison models can be equally effective in large jurisdictions with sufficient sales. When a sufficient supply of sales data and income data is not available, the cost approach should be applied.” (IAAO – Standard on Mass Appraisal of Real Property 4.6.4).
Approach used most by property tax assistance division appraisers in property value study<br>
slide7. Income Approach While the Income Approach to Value can be considered for any income producing property, the following property types are currently valued using Income.
Apartment Complexes
Offices
Hotels
Retail (Big Box, Neighborhood Shopping Centers, Strip Centers, Discount Stores, Discount Drug Stores, Standalone Retail)
Office-Warehouses/Light Industrial and Mini STg’s<br>
slide8. What To Bring For Your Protest<br>
slide9. Photographs of Property Each photo must be date stamped
Drop off at office or email to the assigned appraiser Photos of damages need to be limited to 10-15 photos per property
We will not have time to look at 100’s of photos<br>
slide10. Receipts/Estimates for Repairs Receipts for any repairs must be AFTER January 1
Estimates include
- Roof repairs
Foundation
Any damage to structures<br>
slide11. Sales Price Documentation Listings
Signed closing disclosure/statement
MLS Sheets
Full fee appraisals performed after January 1, 2023<br>
slide12. Affidavits Any affidavit with information in
support of value change May be needed for AG history verification<br>
slide13. Newspaper Articles May provide additional information and relevant dates, depending on situation
Broad, general information may not be considered<br>
slide14. Architectural drawings/
blueprints May provide information on damages
and needed repairs Must be current to current
appraisal year<br>
slide15. Engineering Reports May provide more information on damages and needed repairs than just photographs
Must be reported from within the last year, and items in report can not be repaired by Jan 1<br>
slide16. Property Surveys Useful for disputing property size
and acreage<br>
slide17. Deed Records Useful for disputing ownership<br>
slide18. Commercial & Multifamily Income & expense information may be provided for rental properties
- Tax Returns
- Do not need the whole return, just pages that show rental income
i. LLC – Form 8825
ii. Individual – Schedule E
- Profit & Loss Statement
- Typed document showing rental income & expenses
- Rent Rolls<br>
slide19. Anything you think may affect the value of your property If you are not sure, ask the appraiser assigned to your case what they need. We are happy to help.<br>
Property<br>
slide2. Three Approaches to Value Market Approach (Sales)
Cost Approach
Income Approach<br>
slide3. Market Approach Uses comparable sales to determine value
Sources
MLS
Subscriptions
Sales Contracts
Fee Appraisals Fewer commercial sales available and many different commercial property types<br>
slide4. Cost Approach Uses replacement cost, depreciation, and land values to determine value
Sources:
Construction contracts
Marshall & Swift and other cost manuals
Local builders
Calculate replacement cost of buildings (RCN), subtract depreciation to get depreciated cost (RCNLD), add land value to determine total property value<br>
slide5. Income Approach Uses income & expense information to determine value
Sources
Rent rolls
Profit & loss statements
Tax Returns
Subscriptions
Advertisements
Calculate a net operating income (NOI) using market rents and typical expenses, capitalize the income to determine value<br>
slide6. Income Approach “The income approach is the most appropriate method in valuing commercial and industrial property if sufficient income data are available. Direct Sales comparison models can be equally effective in large jurisdictions with sufficient sales. When a sufficient supply of sales data and income data is not available, the cost approach should be applied.” (IAAO – Standard on Mass Appraisal of Real Property 4.6.4).
Approach used most by property tax assistance division appraisers in property value study<br>
slide7. Income Approach While the Income Approach to Value can be considered for any income producing property, the following property types are currently valued using Income.
Apartment Complexes
Offices
Hotels
Retail (Big Box, Neighborhood Shopping Centers, Strip Centers, Discount Stores, Discount Drug Stores, Standalone Retail)
Office-Warehouses/Light Industrial and Mini STg’s<br>
slide8. What To Bring For Your Protest<br>
slide9. Photographs of Property Each photo must be date stamped
Drop off at office or email to the assigned appraiser Photos of damages need to be limited to 10-15 photos per property
We will not have time to look at 100’s of photos<br>
slide10. Receipts/Estimates for Repairs Receipts for any repairs must be AFTER January 1
Estimates include
- Roof repairs
Foundation
Any damage to structures<br>
slide11. Sales Price Documentation Listings
Signed closing disclosure/statement
MLS Sheets
Full fee appraisals performed after January 1, 2023<br>
slide12. Affidavits Any affidavit with information in
support of value change May be needed for AG history verification<br>
slide13. Newspaper Articles May provide additional information and relevant dates, depending on situation
Broad, general information may not be considered<br>
slide14. Architectural drawings/
blueprints May provide information on damages
and needed repairs Must be current to current
appraisal year<br>
slide15. Engineering Reports May provide more information on damages and needed repairs than just photographs
Must be reported from within the last year, and items in report can not be repaired by Jan 1<br>
slide16. Property Surveys Useful for disputing property size
and acreage<br>
slide17. Deed Records Useful for disputing ownership<br>
slide18. Commercial & Multifamily Income & expense information may be provided for rental properties
- Tax Returns
- Do not need the whole return, just pages that show rental income
i. LLC – Form 8825
ii. Individual – Schedule E
- Profit & Loss Statement
- Typed document showing rental income & expenses
- Rent Rolls<br>
slide19. Anything you think may affect the value of your property If you are not sure, ask the appraiser assigned to your case what they need. We are happy to help.<br>