Deprecation Comps

[DanBuck]

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.

Hey Michael,

btw you usually do extraction or age life for lending jobs... :::?

 

[DanBuck]

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[DanBuck]

Are you trying to extract physical depreciation or functional depreciation?

Im not sure, I always presumed physical as there is useful life but it seems as terrell is saying a bit of both...

 

[Michael S]

Hey Michael,

btw you usually do extraction or age life for lending jobs... :::?

Age-life 90%+

Extraction is usually for those jobs where the cost approach is given primary weight.

 

[hastalavista]

Im not sure, I always presumed physical as there is useful life but it seems as terrell is saying a bit of both...

Many religious facilities are special use/purpose buildings. An exception may be the congregation that sets-up in an industrial building (which is occurring frequently in my market).
Special use/purpose buildings may experience depreciation (loss in value) in excess of the physical deterioration.
The older or more unique the design (think "Gothic Church") the greater the chance of additional depreciation due to functional issues.

 

[Gobears81]

I typically recognize all three forms of depreciation for this type of property, but each market is different, of course.

 

[DanBuck]

Age-life 90%+

Extraction is usually for those jobs where the cost approach is given primary weight.

pm'ed

 

[DanBuck]

Many religious facilities are special use/purpose buildings. An exception may be the congregation that sets-up in an industrial building (which is occurring frequently in my market).
Special use/purpose buildings may experience depreciation (loss in value) in excess of the physical deterioration.
The older or more unique the design (think "Gothic Church") the greater the chance of functional depreciation.

Interesting that may be the case here..It has unusual aspects to this building..

 

[NachoPerito]

Look at a comp sale and do a cost analysis on the comparable sale to determine the annual depreciation. Not a perfect method, but can work. I like matched pairs better, but that seems like something that would be very hard to find.

 

[DanBuck]

Hey Nach,

On that note, why is it that many are of the opinion that matched pair extraction is so hard here. I mean, all you gotta do is get sales comps of these properties consider the cost to build,subtract out the land and you have the depreciated value. The properties may not be exact,but are often similar and can be adjusted, or, even not, if the range of these comps are closely corrolated..?