appears more antagonist than helpful to the first poster
actually we have communicated by PM so I may be answering something brought up there.
Yes, the question revolves around the issue of appraising the whole property interest or the real property interest. I am contending that if the whole property interest value indicated by the income approach is less than the value of the real property interest (HBU issue) by sales approach - that is, the land value as if vacant, then the blue sky ain't there. Crowe recognized the surplus income contribution is the basis for buying and selling the property. Lack the income, and the value revolves around the value of the depreciated improvements and the underlying land.
In either case, self-service or full-service, the income is the key to a "Car Wash" and if it is in poor condition and not making money, then there is a cost to cure that property and/or the property is a vacant lot to clean up and build something better.
Doing a capture rate for the local traffic count time X many dollars per customer is a weak method of calculating the gross income of the comps or to predict the gross income of the subject. I would think water use likely no better. But to answer the OP, it certainly isn't going to violate USPAP as they don't demand any methodology with specificity.
As a new facility, the income is not yet established, therefore, do you rely upon the Cost Approach? Where are you going to find a sale of a new facility to indicate the external obsolscence? Do you project a future income that has no history? Do you look for brand new car washes selling? Are there any? It's a choice.
Still they are not the same approach.
didn't say they were. I said the definition of market value is the same and isn't dependent upon which approach you apply. The issue revolves around what approach will give you an indication of the blue sky and it has to be the income approach or the sales approach, and we already see the problem with using SA - no new sales. See OP.
about self-service car washes when .... "we are appraising a full service car wash?"
isn't that going to be the same basic market and the same basic equipment and the same basic methods of appraisal?
Stephen, I don' t quiet understand what you are driving at about 3 values..I have yet to see a deed with three sets of documentary stamps on one. Yes, Real estate, equipment, and ongoing concern are 3 components of the value. I don't see valuing them separately. Summation isn't the answer. Summation isn't a substitute for allocation.
But I don't see the valuation process as being much different than a restaurant. The building costs X. The kitchen equipment costs Y. And the WHOLE PROPERTY sells one of 2 ways generally. Either as an on going concern where the income is the value driver.. Or, if the income falls short of a profitable enterprise, the base value of the RE is the land value and any contribution the building might make...We had a closed KFC sell for $285,000. As an operating franchise, it would have typically sold much higher.
In my region, there are a number of car washes that have sold. They are all about 5 years old, or were much older facilities that were sold for a song, and they all suffer from a vastly weaker market. People went broke in 08 because of high gas prices and they don't wash their car nearly as often. Some very expensive car washes here are for sale or have went under. Under current economic conditions, there would have to be a real market void in order to justify the construction of a new facility - at least here.
The reality is a business plan evaluation of the property should be the basis for any income projections. If the builder has a feasibility study done, then it will predict the traffic for the carwash and therefore, you can do the income based on that - so long as you do not know the feasibility study was flawed, you can rely upon it.
Typically, such a market study would suggest what and how to maximize the traffic and project if and when the traffic would increase. In a C-Store /Truck stop, I asked the owner how close he felt the business plan was to what is happening and he was very positive about the pattern of business increase and he had only done the study because his banker insisted on it, and he was glad he did it. The consultants numbers may be off somewhat but the trends he predicted were right on, a stabilized income in about 2 years.
