Module 9&10 Flashcards
cost approach procedures
1) estimate value of site as though it is vacant & available to be put to its highest and best use
2) estimate direct & indirect cost improvements
3) estimate entrepreneurial incentive
4) add 2 &3 together to obtain the total current cost
5) establish the depreciation from 3 sources
*physical deterioration
*functional obsolescence
* external obsolescence
6) deduct the depreciation from the total current cost to derive an estimate of the depreciated cost of improvements
7)add the contributory (as is) value of any site improvements
8) add the site value to the total depreciated cost
severe conditions in climate (like Houston & Arizona)
higher cost of construction
categories of climates in the US
1) severe cold climate - northern states that border Canada, along with alaska. Super insulated and foundations will extend to the ground fairly deep so that they are located below the frostline (depth at which the ground freezes) e.g. maine, montana, & minnesota.
2) cold climate - include states that experience freezing temperatures during the winter months. NY, northern Cali, Ohio, Iowa, & Oregon
3) mixed humid - mid-atlantic states to NE portion of Texas. North Carolina, TN, northern portions of Georgia, & Louisiana
4) hot humid - florida & the gulf coast. Georgia, Alabama, areas of Texas, & southern portion of SC
5)hot-dry/mixed dry - southwest part of the US, e.g. NM, AZ, Southern Cali, & parts of TX
3 classifications of climate
using the 5 categories of climate to put into 3 classifications
1) mild climate
2) moderate
3) extreme
cost service provider
has instructions for determining the appropriate climate for subject property
r-value
rating that indicates resistance to heat conduction for a particular insulating material
perimeter sketch & area calculation
measure the exterior using tape measure, wheel, or laser device based on those measurements create a sketch of the subject property
calculate GLA
porch & garage not included as gross living area.
gross building area
for commercial and industrial buildings, includes below grade space, but excluding unenclosed areas, e.g. garage and parking
net rentable area
for office buildings; amount of space rent is based on, calculated according to local practice
gross leasable area
total floor area designed for occupancy & exclusive use of tenant, including basement and mezzanines & measured from the center of interior partitioning to outside wall surfaces.
commercial construction classification
class A - steel columns & beams that hv fireproofed with masonry, concrete, plaster, or other noncombustible material. Rood formed concrete, precast slabs, gypsum on steel deck & fireproofed. Walls are non-load bearing (structural steel skeleton)
class C - masonry or concrete load-bearing walls with or without pilasters including tilt construction Wood or plank floors, roof wood or steel
quality rating
low cost - minimum code requirements, lil regard for architectural appearance or amenities
average - deigned for max economic potential. complies with std code construction & have simple ornamentation & finish.
good - designed for good appearance, comfort, & convenience as well as an element of prestige. Ornamentation treatment is usually higher quality & interior are designed for upper-class rentals
excellent - prestige buildings. Part of cost must be written off to the pride of ownership & some income intangibly derived from ads. Built for established professional with higher incomes.
cost approach for commercial property
1) determine class
2) determine quality
3) base rate for building selected from cost service provider
*adjustments are made for: wall height factors, shape of building, sprinkle system, & elevator
4) current cost multiplier & local cost multiplier would be applied to the adjustment base rate
5) any indirect cost not accounted for
6) add entrepreneurial incentive is added to indirect & direct cost
7) final cost rate per sq ft is applied to the size of the building & site improvements & site value are added into developing an overall opinion of value
depreciation
the estimate amount allocated among: physical deterioration (tangible & observable wear & tear; fast destruction; functional obsolescence - difficult to detect, older building, lack energy retrofit; external obsolescence - loss of value due to outside property boundaries. external obsolescence is incurable.
