Income Capitalization for an ALF?

[Michigan CG]

PE,
The expenses are greater than typical apartment type improvements.

Expense ratio or expenses per unit?

In my markets, expenses tend to run 45-55% of EGI. A 100 unit building with $500/month rent would have an NOI of around $300,000.

Take the same 100 units but charge $1,000/month rent because it is an ALF (I have to smile every time I type ALF -- thanks Leggett) but have expenses of 600 month (60%) and you have an NOI of $480,000.

 

[masmia]

Total expenses are greater, Operating expense ratio is lower.

 

[Boonders]

What is it with you guys and instantly questioning a persons ability to complete an appraisal? For all you know I am a Cert Res with more commercial experience than you have or maybe, just maybe, I am a Cert Gen and the forum hasn't updated my licensing info. I think that from now on so that you guys can maybe stick to helping a fellow appraiser out with your opinion instead of questioning his/her capacity or ability to appraise I will start each post by stating that I am indeed a Cert Gen and the forum hasn't updated this info yet. That way you can go straight to the topic at hand and not get sidetracked by this issue. FYI in FL a Cert Res can complete commercial assignemnts as long as they are not for federally related transactions.

Timothy,
I disagree, the income produced by the property reflects a service provided that includes among other things lodging for the elderly. Because of the service provided by the business the rental income is much greater than what it would be if you used the property as say a small apartment building. I am not appraising the business but the real estate.

:Eyecrazy:m2:

The income approach is still very applicable.

"Owner Occupied"...jaaaeeezzzz...

 

[Boonders]

...the only problem the lender has is "this needs an income approach"....uf-da.

This reminds me of one of my mentors common phrases when we see some interesting reports: "we are working way too hard"

 

[PropertyEconomics]

What is it with you guys and instantly questioning a persons ability to complete an appraisal? For all you know I am a Cert Res with more commercial experience than you have or maybe, just maybe, I am a Cert Gen and the forum hasn't updated my licensing info. I think that from now on so that you guys can maybe stick to helping a fellow appraiser out with your opinion instead of questioning his/her capacity or ability to appraise I will start each post by stating that I am indeed a Cert Gen and the forum hasn't updated this info yet. That way you can go straight to the topic at hand and not get sidetracked by this issue. FYI in FL a Cert Res can complete commercial assignemnts as long as they are not for federally related transactions.

Timothy,
I disagree, the income produced by the property reflects a service provided that includes among other things lodging for the elderly. Because of the service provided by the business the rental income is much greater than what it would be if you used the property as say a small apartment building. I am not appraising the business but the real estate.

(my bold)

Even if that were the purest of cases, a percentage of the rent has to go to the real estate and thus the real estate does in fact generate income. If the majority of sales of these facilities includes the blue sky of the business, and that is what they measure from a sales comparison approach, do you then deduct from that approach in order to reflect only the realty involved?
I think it is becoming increasingly clear that this is a complex assignment and that all approaches to value are applicable.
The question then remains, do the appraisers have the experience necessary in order to provide a credible valuation. A question that none of us here can answer.

 

[Michigan CG]

MASMIA,

From my count you have at least three MAI appraisers, one soon to be MAI appraiser and countless other folks who have been appraising commercial properties for a very long period of time, all telling you the same thing. These are people I would be calling if I had a problem.

 

[PropertyEconomics]

MASMIA,

From my count you have at least three MAI appraisers, one soon to be MAI appraiser and countless other folks who have been appraising commercial properties for a very long period of time, all telling you the same thing. These are people I would be calling if I had a problem.

...... echoing the sounds .... of silence.

 

[masmia]

I spoke with my former mentor yestarday afternoon and brought up the info obtained in this post along with extra info I found on the net. After talking about it for a while he agrees that we should have originally done the income approach.

This has put me in a tough situation cause I was under the impression that he knew what he was doing. Now my name is on the appraisal as a Cert.Gen. and I'm just as liable as he is where as before when I was a Cert. Res. he was fully responsible for any similar deficiency.

This is not the first time I have had reason to doubt his appraisal knowledge and, although he is a great person and I owe my Cert.Gen. license to him, I really need to find another Cert.Gen., preferably MAI, with which to associate myself to expand my expeience. This along with adding some AI classes to my schedule.

Thanks to all here for the info provided, you have been very helpful.

It seems as always that the more a learn the less I know. I think I'm gonna add this as my signature.

Thanks again.

 

[Stephen J. Vertin MAI]

Now my name is on the appraisal as a Cert.Gen. and I'm just as liable as he is where as before when I was a Cert. Res. he was fully responsible for any similar deficiency.

The client pointed out the deficiency. Get the orignal back, correct it and move on. If we all had our licence yanked for errors the clients or reviewers caught in the process there would be no one here to give you advice. Count it as experience.

 

[PropertyEconomics]

I spoke with my former mentor yestarday afternoon and brought up the info obtained in this post along with extra info I found on the net. After talking about it for a while he agrees that we should have originally done the income approach.

This has put me in a tough situation cause I was under the impression that he knew what he was doing. Now my name is on the appraisal as a Cert.Gen. and I'm just as liable as he is where as before when I was a Cert. Res. he was fully responsible for any similar deficiency.

This is not the first time I have had reason to doubt his appraisal knowledge and, although he is a great person and I owe my Cert.Gen. license to him, I really need to find another Cert.Gen., preferably MAI, with which to associate myself to expand my expeience. This along with adding some AI classes to my schedule.

Thanks to all here for the info provided, you have been very helpful.

It seems as always that the more a learn the less I know. I think I'm gonna add this as my signature.

Thanks again.

Masmia ... first Id like to point out that no matter what your license level, if you sign a report you are personally responsible for it. You have no greater liablity as a trainee as you do as a cert general if you sign the document so allay your fears there. You are responsible.
Secondly, all appraisers are learning all the time. Not every appraiser will know exactly how to handle every situation, yes even CGs.
I would suggest a bit more discussion when you are faced with these things prior to publishing the report rather than after, however, that being said we all face these issues. It simply happens.
Complete the income approach, revise the appraisal, notify the client of the need for the changes, and simply move forward. Its the best way to handle things.
If your mentor is good with you then you are in a good situation. Not all MAIs are good teachers, and not all MAIs are good appraisers. Unfortunately that is life.

Best of luck.