Deprecation Comps

[DanBuck]

Hi all!


Question for all you experts out there. How does one go about finding comps for depreciation for a religious building(church). Back in the day my mentor used to just make us deduct a standard 40%-50% depreciation without a conscious.

I know there's a better way to do this-especially to do this right for a client. Thanks.

 

[nstanbru]

You don't need to find comps for depreciation, you need to find comps period, to be included in your appraisal and report. Once you have them, you can analyze them to determine the depreciation. Some may also suggest using the age/life method.

 

[DanBuck]

You don't need to find comps for depreciation, you need to find comps period, to be included in your appraisal and report. Once you have them, you can analyze them to determine the depreciation. Some may also suggest using the age/life method.

I understand the logic in that. Suppose you have sales comps of other churches. You'd estimate cost to build and then based on the actual sale price figure how much the depreciation outta be. - I guess i thought it can only be figured by seeing how much say deductions on a straight-line basis(not lump sum deductions) in a buildings tax records by an accountant...

(Age life I always thought was too hard to support)

 

[Michael S]

http://www.appraisalinstitute.org/i...roach-a-journey-into-commercial-depreciation/

I highly recommend this book. It's pretty short but has lots of good examples and information.

 

[DanBuck]

http://www.appraisalinstitute.org/i...roach-a-journey-into-commercial-depreciation/

I highly recommend this book. It's pretty short but has lots of good examples and information.

Great-never noticed this one before..

 

[leasedfee]

You can extract a depreciation rate from the value of the building (without land) as a percent per year of the RCN. Alternatively, the attached graphic is a match-pair. It found a rate commensurate with typical commercial structures. Another found a broader range between 1% to 5%/year.

 

[Michael S]

When I've done extraction (mostly for industrial properties) I've typically found it around 2-3%/year for 20-40 year old buildings. Much newer or older than that and it could vary quite a bit as you may not have good information on when that building built in 1960 was completely renovated in 1988. Or you may see 5%/year for a 10-year old building which could mean a lot of external or functional obsolescence and not necessarily physical depreciation.

 

[Terrel L. Shields]

You can extract accrued depreciation alone, Leased fee is spot on. USPAP does not require anything more. I prefer to do a straight line age depreciation to separate function and physical. The one issue I've been taking notice of is whether the building is traditional brick building or a red iron steel frame square structure. The old buildings seem to suffer much more depreciation that a more flexible design. And many churches now have separate youth facilities which are based around a gymnasium and may have bands, sports, or even pool tables.
This one incorporates both styles and I would say suffers substantially from functional issues.

 

[DanBuck]

second part looks almost like a hangar..

 

[hastalavista]

Are you trying to extract physical depreciation or functional depreciation?