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Advice On A Appraising Problem

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Sun Tzu

Freshman Member
Joined
Oct 20, 2016
Professional Status
Appraiser Trainee
State
Wisconsin
I have a mixed use commercial building that is empty, gutted and has no heating or electric. I have to do a "as is" value. I'm doing income and sales comp on it. Do I adjust the cap and sf or do values and reduce for cost of improvements? Or do I even do a income?
 
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Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Yes to both.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
An appraisal problem
An as-is value
:)

What is the highest and best use as improved? Perhaps a discounted cash flow analysis is more appropriate in that there may be a lease-up period. There isn't really enough information in the original post to get a good feel for the best route, but the highest and best use/ market analysis should yield some insight on the appropriate route to take.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
An appraisal problem
An as-is value
:)

What is the highest and best use as improved?
(my bold)

The key question that will not only tell you:
A) What should be done with the property in its as-is condition, but also
B) Who is going to do it; and
C) When can it reasonable expected to be done?

Once you get the answer to these questions, you'll have a path to take on how to value the property. I think your question (and, nothing wrong with it) is jumping to the "how should I" before you address the "what do I have, who is going to buy it, what are they going to do with it, and when will they do it?".

But here is one way the market works:
If I am an investor that thinks the property should be used as a mixed-use property, then I'm going to try to figure out:
1. How much will it be worth once I get it to where I think it should be?
2. How much is it going to cost me to get it into the condition that I think it should be?
3. How long is it going to take me to get it in that condition and then lease it up?
4. Based on all that uncertainty, how much profit do I need (entrepreneurial incentive) to make it worth my while to buy the property as-is and complete the build-out and lease it up so that it is stabilized?

If you can answer those four questions, you'll have the inputs to solve the value problem.

Good luck!
 
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