Figures For Unit/bedroom/gba/rm On Small Residential Income

[Metropolis]

We are having a debate on how to reconcile the figures for the Value per Unit, Rm., GBA, and Bdrms at the bottom of the sales comparison approach in the SRIP form. My position is to derive a figure from the comparable that is most similar with regard to that specific item, changing the comparison if necessary. For instance, Comp 1 is most similar overall, so I use it for my Value per Unit, but Comparable #3 is a 1/1 and 2/1 duplex like the subject and so that comparable is used to determine the Value per Rm and Bdrms. Comparable #2 is the most similar in GBA, so I use that for my figure for GBA. My husband says to use the same single, most similar comp for all figures. What say you?

 

[gregb]

There is a reason for the breakdown of the units of comparison, which would result in using the particular comparable or comparables more similar to the subject in gba, rooms, units and bedrooms.

A discussion in a two unit report I looked at this week:

There are basically four units of comparison available for estimating the market value of small residential income properties in the sales comparison approach. These are the price per square foot, the price per unit, price per bedroom, and the price per room indicators of value. The units of comparison analysis are limited to the closed sales with the one active listing reflecting the upper end of the range.

The price per square foot indicators of the closed comparables range from approximately $516 to $690 per square foot. Typically larger units have lower price per square foot indicators than smaller properties. A price per square foot indicator of $550 is considered to be appropriate for the subject given its smaller size relative to the comparables. This is within the range indicated by the comparables.

2,070 Sq. Ft. X $550 = $1,138,500

The price per unit indicators of the closed comparables (all similar two unit properties) range from $508,500 to $636,500 per unit. Typically, price per unit indicators are higher on properties with fewer units then they are on properties with more units. All of the comparable sales have two rental units in this case. A price per unit at the middle of the range at $550,000 per unit is considered appropriate for the subject due to its physical characteristics and overall market appeal. Based on the price per unit indicator, the estimated market value of the subject property is:

2 Units X $550,000 = $1,100,000

The price per bedroom indicators of the closed sales range from $254,250 to $279,000, however all of the comparables have fewer bedrooms than the subject, warranting the use of a lower price per bedroom indicator. At $200,000 per bedroom:

6 X $200,000 = $1,200,000.

The price per room indicators of the closed comparables range from $127,125 to $141,444 per room. Typically, properties with a greater number of total rooms reflect lower price per room indicators than properties with a smaller number of rooms. The per room indicator considered appropriate for the subject is $120,000 per room, below the range of the comparables as the subject has more room than all of the comparables. Based on the price per room indicator, the estimated market value of the subject property is:

10 rooms X $120,000 = $1,200,000

 

[Metropolis]

Wonderful! Thank you! So with these figures indicating a range of 1.1 to 1.2, how was the final estimate of value reconciled? Just for conversation...

 

[gregb]

The Income Approach would give a good idea of the final value conclusion:

$6,075 X 190 (GRM) = $1,154,250

 

[bnmappraisal]

Nice example Gregb! Thanks for sharing

 

[Digger88]

There is a reason for the breakdown of the units of comparison, which would result in using the particular comparable or comparables more similar to the subject in gba, rooms, units and bedrooms.

A discussion in a two unit report I looked at this week:

There are basically four units of comparison available for estimating the market value of small residential income properties in the sales comparison approach. These are the price per square foot, the price per unit, price per bedroom, and the price per room indicators of value. The units of comparison analysis are limited to the closed sales with the one active listing reflecting the upper end of the range.

The price per square foot indicators of the closed comparables range from approximately $516 to $690 per square foot. Typically larger units have lower price per square foot indicators than smaller properties. A price per square foot indicator of $550 is considered to be appropriate for the subject given its smaller size relative to the comparables. This is within the range indicated by the comparables.

2,070 Sq. Ft. X $550 = $1,138,500

The price per unit indicators of the closed comparables (all similar two unit properties) range from $508,500 to $636,500 per unit. Typically, price per unit indicators are higher on properties with fewer units then they are on properties with more units. All of the comparable sales have two rental units in this case. A price per unit at the middle of the range at $550,000 per unit is considered appropriate for the subject due to its physical characteristics and overall market appeal. Based on the price per unit indicator, the estimated market value of the subject property is:

2 Units X $550,000 = $1,100,000

The price per bedroom indicators of the closed sales range from $254,250 to $279,000, however all of the comparables have fewer bedrooms than the subject, warranting the use of a lower price per bedroom indicator. At $200,000 per bedroom:

6 X $200,000 = $1,200,000.

The price per room indicators of the closed comparables range from $127,125 to $141,444 per room. Typically, properties with a greater number of total rooms reflect lower price per room indicators than properties with a smaller number of rooms. The per room indicator considered appropriate for the subject is $120,000 per room, below the range of the comparables as the subject has more room than all of the comparables. Based on the price per room indicator, the estimated market value of the subject property is:

10 rooms X $120,000 = $1,200,000

i do 1025's pretty frequently and understand/agree with all this completely. for the life of me i could never explain it like you just did greg, NICE!

 

[bart nathan]

Drop in a duplex or a triplex and you can really see those per unit/bed/room/bath numbers get out of whack.

 

[Howard Klahr]

While the analysis provided by Greg is illustrative of 2-4 unit properties, keep in mind that the number of units and the unit mix are the driving value factors. Rent for a 1 bedroom unit while lower in magnitude is often higher on a par sq ft basis while larger 3 bedroom units generate more revenue on a per unit basis, the amount on a per sq ft basis will be lower.

The biggest problem with the 1025 form is that adjustments are typically noted on a dollar basis but the impact of the adjustment will impact each of the indicators very differently.