Appraising Dog Kennels

[runner52]

Has anyone out there appraised dog kennels? My client wants all three approaches (Sales, Income and Cost). No problem with Sales and Cost but I'm really questioning the relevance of the Income. Besides being almost non-existent, any leases that do exist are in large concrete or metal warehouses in the middle of the city where someone leases space to run their kennel business. Nothing like what I am appraising where it's 8 acres and 8 kennel buildings..Cost is also supported as the owner is expanding the facility...but really questioning Income...any experience out there?

 

[Financially Feasible]

I'm assuming that you're doing market value, no? If so, is the H&BU really as a dog kennel?

 

[Terrel L. Shields]

You have to appraise the business to comply. Use the owner-operator statement to develop a NOI statement, project income and expenses and capitalize the net income....developing a cap rate? that's the issue.

 

[PropertyEconomics]

You have to appraise the business to comply. Use the owner-operator statement to develop a NOI statement, project income and expenses and capitalize the net income....developing a cap rate? that's the issue.

Saying you are valuing the Real Estate is also a problem with this approach.

 

[Brian Weaver]

Has anyone out there appraised dog kennels? My client wants all three approaches (Sales, Income and Cost). No problem with Sales and Cost but I'm really questioning the relevance of the Income. Besides being almost non-existent, any leases that do exist are in large concrete or metal warehouses in the middle of the city where someone leases space to run their kennel business. Nothing like what I am appraising where it's 8 acres and 8 kennel buildings..Cost is also supported as the owner is expanding the facility...but really questioning Income...any experience out there?

I appraised a kennel ages ago. Out in a rural/suburban locale. About 5 acres...a house, runs, fencing, a heated low-slung building. It was a purchase with a $100,000 "value" attributed to the biz. I just did the bricks & sticks. Value-in-exchange; not value-in-use. The seller had a non-compete and three-weeks to stick around and train the buyer.

The lender was just doing the bricks & sticks...not the going concern. Do people "lease" kennels out by you? I doubt it. Does the lender want you to treat this like "motel" income? These aren't "flagged" properties. I'm not aware of any big chain kennels...but then...I don't have a dog, either.

 

[stephenbullock]

Forget the income approach. Your were not hired to appraise this as a business. Do you know the appropriate compenstation for a kennel manager adjusted for hours worked? Cost approach is probably best bet, comps will likely be very disimilar but may provide a suitable range of value.

 

[H.B. Userman]

You could do it backwards, and say this type of building would normally be leased on a percentage of the cost to replace it x-x% of the replacement, capitalizing it at a rate that is in line with the risk of the investment. It's not really an income approach, rather it's developing it only in order to relate an estimated net income & risk with the investment, which is what most lenders ask for if the income approach is requested but, not applicable. In my market, all of the dog kennels I know are owner-occupied. So, if the owners were to lease one, they would most likely pay a rate that is commensurate with the cost to replace, discounted for depreciation.

 

[CANative]

Does the lender want you to treat this like "motel" income?

Just figure out the RevPAW and you're half way there.

 

[Pittsburgh Pete]

Can't imagine one would find rentals of kennels. Any income approach, therefore, would have to be based on income from operations. How that bottom line is processed (i.e. capitalized) to yield real estate value is problematic. I'm sure it can be done but is it worth the effort given adequate data from the other two approaches to value.

 

[Mr Rex]

A stupid question from a Residential guy, but when doing the Cost Approach wouldn't there be a substantial Functional Obsolescnce factor for the configuration as a kennel?