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Not deducting for vacancy.

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Are you appraising a walgreens?
Our role is to mirror the market, and everyone keeps throwing walgreens into the picture. remove them and you will understand the majority of the posts. If you are appraising a walgreens then I think you know the methods that should be used.
Replace "Walgreen's" with any tenant of your choosing - my point remains the same - mirror the market, don't "correct" it.

And actually, I'm in the middle of a portfolio of CVS's ...
 
PL1957 said:
mirror the market, don't "correct" it

No one is trying to "correct" the market. However, if the lease agreement does not provide for passing on the cost(s) to the tenant, then these expenses must be deducted to derive Net Opertating Income (NOI). A Vacancy and Collection Allowance, management fee and reserves are all appropriate costs for investment real estate. Unless these items are accounted for, then you are dealing with Gross Rental Income, not Net Operating Income. Dividing the sale price of a property into the GRI does not equate to a capitalization rate. A cap rate implies NOI.
 
Replace "Walgreen's" with any tenant of your choosing - my point remains the same - mirror the market, don't "correct" it.

And actually, I'm in the middle of a portfolio of CVS's ...


And how do you account for the time down between tenants? Do you not think thats vacancy? Vacancy measures over the LIFE of the building.
How about you had done a market value for CompUSA .. with no vacancy on that building .. you would have been wrong.
Report what REALLY happens in the market place.
 
Regardless of what the guru's in Sydney think, they have a long way to go before they control any market outside of Australia. They compete in the same arena as capital from the rest of the world, including other parts of the Pacific Rim and EMEA. They can no more control market rents or cap rates than they can make the sun rise in the west.

Perhaps not having experienced their manipulation this statement is entirely understandable.........however beleave me it does happen.
 
When appraising an owner-occuppied manufacturing building, how would you consider an income approach then?

We have none of the type leases which have been described in this thread. Lease information is very hard to derive, and there is wide variation on actual leases of commercial rentals in this area.

Another of the problems working in rural America.

Wayne Tomlinson
 
When appraising an owner-occuppied manufacturing building, how would you consider an income approach then?

We have none of the type leases which have been described in this thread. Lease information is very hard to derive, and there is wide variation on actual leases of commercial rentals in this area.

Another of the problems working in rural America.

Wayne Tomlinson


If your market is largely owner occupied perhaps the income approach to value isnt a reliable method of valuation. In that instance I sure hope you have sales of buildings from one owner occupant to another.
I appreciate appraising in rural America, the available data is certainly limited at best, however, I do often find rural appraisers have a very good "feeling" for value and know their markets quite well.
 
Perhaps not having experienced their manipulation this statement is entirely understandable.........however beleave me it does happen.
No, they tell you it's happening, but it really isn't. Although they have substantial investments in various sectors, the markets in the US are too large to be manipulated in that fashion. Take Centro as an example - they still own a huge amount of very good and well located retail real estate; however, they don't have a dominant position in any single market. In each of the markets in which they have a presence, they face significant competition because they are smart enough not to invest in a market that is so shallow that it could be manipulated in that fashion.
 
I have to admit I have not read the entire string but I had a property where vacancy was not deducted.

It was a modular home park with high caliber structures that actually looked like stick built. The park was established 20 years ago and never had a vacancy, except original lease-up. The park was for seniors 55 and above (typically higher credit worthiness than other demographic groups). The owners held a +$200,000 home as collateral in case of default on rent. It was a function of the leases. If the tenant did not pay the home had leans placed.

I guess it would have been possible to move out during the night but moving one of these baby's would have been more costly than paying rent. Further there had never been a move out. Once the modular house was placed on the pad and landscaped there would have be significant cost to remove.
 
I have to admit I have not read the entire string but I had a property where vacancy was not deducted.

It was a modular home park with high caliber structures that actually looked like stick built. The park was established 20 years ago and never had a vacancy, except original lease-up. The park was for seniors 55 and above (typically higher credit worthiness than other demographic groups). The owners held a +$200,000 home as collateral in case of default on rent. It was a function of the leases. If the tenant did not pay the home had leans placed.

I guess it would have been possible to move out during the night but moving one of these baby's would have been more costly than paying rent. Further there had never been a move out. Once the modular house was placed on the pad and landscaped there would have be significant cost to remove.


Another great instance where historical information is invaluable.
 
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