Formulas - Appraisal & Value Flashcards
Adjusting Comparables
1) Never subtract the subject!
2) If the comparable is superior to the subject, subtract value from the comparable.
3) If the comparable is inferior to the subject, add value to the comparable.
Gross Rent Multiplier
Sales Price = Monthly rental income x Gross Rent Multiplier
Gross Rent Multiplier
Monthly Rental Income = Sales Price / Gross Rent Multiplier
Gross Income Multiplier
Gross Income Multiplier = Sales Price / Annual Income
Gross Income Multiplier
Sales Price = Annual Income x Gross Income Multiplier
Gross Income Multiplier
Annual Income = Sales Price / Gross Income Multiplier
Cost Approach Formula
Value = Land Value + (Improvements + Capital Additions - Depreciation)
Depreciation
Annual Depreciation = Beginning Depreciable Basis / Depreciation Term (Number of Years)
Depreciation Basis
(Initial Property Value + Any Capital Improvements - Land Value)
Income Capitalization Formula
Value = Annual Net Operating Income / Capitalization Rate
Income Capitalization Formula
Annual Net Operating Income = Value x Capitalization Rate
Income Capitalization Formula
Capitalization Rate = Annual Net Operating Income / Value
Net Operating Income
NOI = Potential Rent - Vacancy Loss + Other Income - Operating Expenses
NOI does not include debt Payments!
