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  #1  
Old 10-17-2011, 06:29 PM
JC888 JC888 is offline
 
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Default Direct Comparison Theory Question

I got a question in regards to how a change in subject's operating expenses (operating expenses ratios) can affect the market value derived by using the direct comparison approach? ( referring to multi-residential properties)

The only thing I could think of is due to increase in the subject's operating expenses ratio, different weights will be given to the best comparables, thus deriving the new market value. Is my thought process correct?

Any comments is greatly appreciated,
Thanks.
JC
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  #2  
Old 10-17-2011, 07:45 PM
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Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
how a change in subject's operating expenses (operating expenses ratios)
Indirectly, expenses increase with the age of the building...a modern building will have more efficient energy saving devices, will suffer lower short term repair costs, and overall a newer building should have a lower expense ratio and a longer life
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  #3  
Old 10-17-2011, 09:40 PM
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Eh! Hoser. About the only thing I could guess based on the cryptic question....is something
along the lines of a increase in OE could some how be related to DSC approach if we are
somehow trying to make an adjustment for economic obsolescence. Is this a test question?
  #4  
Old 10-17-2011, 10:35 PM
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Economic obsolescence (ie external) for increased expenses within (functional) .... really??????
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Old 10-18-2011, 05:16 AM
Ken B Ken B is offline
 
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Differences in operating expenses, all other things being equal, would be adjusted as an Economic Characteristics line item.

Good luck supporting that adjustment with matched pair analysis.
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  #6  
Old 10-18-2011, 08:38 AM
farmguy farmguy is offline
 
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How about Gross Rent Multiplier? It is a SC technique. I would consider OER in comparing different GRM's.
  #7  
Old 10-18-2011, 08:52 AM
leelansford leelansford is offline
 
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Quote:
Originally Posted by JC888 View Post
I got a question in regards to how a change in subject's operating expenses (operating expenses ratios) can affect the market value derived by using the direct comparison approach? ( referring to multi-residential properties)

The only thing I could think of is due to increase in the subject's operating expenses ratio, different weights will be given to the best comparables, thus deriving the new market value. Is my thought process correct?

Any comments is greatly appreciated,
Thanks.
JC

I have to ask:

Is the change in the operating expenses due to management of the subject OR things integral to the subject property?
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  #8  
Old 10-18-2011, 08:30 PM
TigerBait TigerBait is offline
 
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"Direct Comparison" is not an approach to value......

Just sayin
  #9  
Old 10-18-2011, 08:50 PM
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Quote:
Originally Posted by leelansford View Post
I have to ask:

Is the change in the operating expenses due to management of the subject OR things integral to the subject property?

Lee ... you and I are thinking the same thing.
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  #10  
Old 10-18-2011, 11:59 PM
leelansford leelansford is offline
 
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Quote:
Originally Posted by PropertyEconomics View Post
Lee ... you and I are thinking the same thing.


Great minds think alike.




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