Remaining Economic Life, What Say You?

[Digger88]

just curious...


example 1. 80 year old house, completely gutted to the studs and rebuilt top to bottom in past year =

example 2. 14 year old condo, original in average condition =

example 3. 26 year old rambler with updates (appliances, flooring, baths, windows, hvac & roof) =

the answer is of course 5, 7 & 10.

 

[George Hatch]

REL refers to an economic construct, so physical condition is only one element of that. Sometimes it's not even the most important element.


Just to use one of your own scenarios to illustrate that, the property interest in a 14-yr old condo unit most likely has an indefinite REL because the only way a mapped condo site gets redeveloped is if the ownership of all the units decides to do it.

I'll bet you never thought of that, did you?

 

[Mr Rex]

REL is 30 years or more if routine maintenance and updating occurs as needed assuming no land use changes are anticipated. I service an area with homes dating to the early 1800's and singlewides from the 60s. Sherman missed the houses during his infamous march to the sea torch in hand and the singlewides are solid rental stock and will remain so as long as there are government subsidized rents.

 

[George Hatch]

I just attended a funeral in a chapel on the grounds of a Californio Mission that was founded in 1798. Not too shabby.

 

[Peter LeQuire]

I've appraised a fair number of houses with chronological ages of 100 years or more, and there are no indications that their remaining economic life is significantly less than that of houses having similar external influences - including zoning and restrictions - built in the same city in the past 5 years.

 

[Terrel L. Shields]

REL is not about the age of a building. It is about the remaining life....

 

[Digger88]

REL refers to an economic construct, so physical condition is only one element of that. Sometimes it's not even the most important element.


Just to use one of your own scenarios to illustrate that, the property interest in a 14-yr old condo unit most likely has an indefinite REL because the only way a mapped condo site gets redeveloped is if the ownership of all the units decides to do it.

I'll bet you never thought of that, did you?

so condo slums in dc have indefinite rel?

 

[Digger88]

REL is not about the age of a building. It is about the remaining life....

so if you were blind what would be the first question youd ask?

 

[George Hatch]

so condo slums in dc have indefinite rel?

Short of getting the government to intercede for them with eminent domain (which I would argue does not represent market activity), how else would a developer go about assembling the property rights necessary to redevelop an existing condo project?

Pay attention to what Terrel and Peter are trying to tell you because it's an important point, particularly when we're talking about Cost Approach to MV.

If you have 2 identical SFR structures in identical physical condition but in different locations they could *easily* have different RELs. Much depends on what's going on around them. One could be at the end of it's economic life and represent a cost to cure while the other could be anticipated to continue on indefinitely. If you think about this in terms of different neighborhoods in your stomping grounds I'm sure you can identify neighborhoods where redevelopment is occurring and other neighborhoods where redevelopment is unlikely at any point in the foreseeable future.

 

[Terrel L. Shields]

so if you were blind what would be the first question youd ask