You might consider contacting Brokers and Appraisers who work in areas with islands to see if there is some sort of general difference. I know these areas are not within the market area you are dealing with and the commuting requirements maybe different, but they may still provide a supportable adjustment factor. Beaver Island vs. Charlevoix & Emmet County mainland, Drummond Island and Les Cheneaux Islands vs. the Detour, Hessel, Cedarville areas, Sugar Island vs. Sault Saint Marie area. Beaver Island requires a longer and more costly commute, while the others are much closer to the mainland and feature a relatively short water crossing.
I would also give some consideration to the time required to get from the main land to the island and then increase your comparable search area by an equal amount of drive time. In other words if it would take 20 minutes to unpack your vehicle, load the boat, travel to the island and then unpack the boat you could increase your search radius be 20 miles. Again not ideal but if the increase in commute time reflects a 10% drop in value it would be something. Lastly I would consider the difference in the cost of construction, utility reliability, getting a repairman to visit, etc. These type of service providers are going to charge for all of their time plus a hassle factor. If the commute to the island including loading and unloading tools and materials would take up an hour of an 8 hour work day then the island work is going to cost at least 12.5% more just for labor.
Regardless of what you do and what you determine is a reasonable adjustment factor, explain, explain, explain. Put a detailed write up in the report explaining your level of research and how you came to a particular decision. While someone may disagree with your adjustment factor they will have an understanding of how you reached your conclusion. There are times people will disagree with a value conclusion, cap rate, occupancy rate, income/expense projection, etc. in one of my reports and I will ask them if they have reviewed the entire report. Generally the answer is no and then I will ask them to read the report and give me a call with any questions. Very rarely do I hear back from them and if I do it is usually a general discussion about how changing an assumption would impact value.
