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Site Valuation Question

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bmazerolle

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Aug 15, 2007
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Licensed Appraiser
State
Arizona
new to commercial (2 months). Subject - 12 acre site zoned multi family. No similarly zoned vacant land sales available for comps. There are improved sales, but the improvements (i.e. apartments) are between 20 and 30 years old. Looking for advice on determing most appropriate / reliable method for subject valuation. With no comps of similar vacant sites, perhaps retail site value extraction from comparable improved properties, but if cost approach is applied to the comparables to perform extraction, estimating physical depreciation at those ages could be problematic. Client / developer has only a very vague concept (basically offered a unit count and building class - that's it), no budget, no development or construction estimates available. Any advice would be very much appreciated.
 

PropertyEconomics

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Jun 19, 2007
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Certified General Appraiser
State
New Mexico
What does your mentor say? Do you have any leased sites?
 

bmazerolle

Thread Starter
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State
Arizona
haven't spoke with my mentor yet, wanted to attempt to acquire a better sense of my options prior to doing that (just to demonstrate some initiative, that's all). Haven't looked for leased sites.
 

PropertyEconomics

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State
New Mexico
When you have no comparables you have to think of other ways. Only being in the business 2 months as a commercial appraiser I doubt they will expect you to know everything. Tell them what you have done and ask where to look next. They will be glad of your initiative thus far and guide you toward where you need to go next.
 

hastalavista

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May 16, 2005
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Certified General Appraiser
State
California
No comps in your market? Here's my reaction to that situation (but don't follow it as advice because I'm posting for feedback/critique from those with experience- since I have none! :new_smile-l: ):

A. Go to a competing market with similar property-type, cap & yield rates that match your multi-unit market, but with available land sales, and consider them as your vacant land comparables.
B. Complete a land residual analysis on the improved-sale comps (I do not know what "retail site extraction" means?) using the land sale cap rates from step "A" and see if the values are consistent with the sales prices from the competing market.


Good luck!
 

Michigan CG

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Nov 1, 2006
Professional Status
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State
Michigan
If you are from a residential mindset here is the first place you lose it. How far back in time have you gone for land sales? Throw out the 6 months or one year mentality. You may have to go back 3, 4, 5 years and then maybe determine how much land is going up in value over that time period (if any).

Denis has a very good idea, competing markets are a good place to go. Have you looked at senior living centers and other residential developments? How about condo sites?

For my market finding cap rates for land is very challenging to say the least unless you want 10 McDonald's comps at 6.5%.

Commercial can be very subjective and introspective at times.
 

PropertyEconomics

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Professional Status
Certified General Appraiser
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New Mexico
Denis.... I think you give sound advice. Use of competing markets will most probably work. Measureing cap rates for land though can only be done if you have good data on land leases, which will be crucial in the analysis.
Measurement of multifamily land is typically done on a price per unit basis .. atleast in my market it is. Going back much farther in time is also a good idea ... 2, 3, 4 years is not uncommon.
Typically if there is demand, investor expectations between similar markets remain the same as do costs and what an investor can afford to pay for land given similar income streams.
 
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CANative

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Jun 18, 2003
Professional Status
Retired Appraiser
State
California
Land residual?

For 24 acre lot...

Units per acre = 9
Rent per month = $1,000
Development and construction cost = $80,000/unit
Operating expense ratio = 30%
Vacancy rate = 8%
Ro = 9%

PGI = $2,592,000
Vacancy - $207,360
EGI = $2,384,640
OE - $715,392
Io = $1,669,248

Value = $18,547,200 ($1,669,248 / 0.09)

Dev. & Const. = $17,280,000

Residual value to land = $1,267,200

Don't forget to account for timing.
 
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Kali the Boston Terrier

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Joined
Jul 7, 2003
Professional Status
Certified General Appraiser
State
Michigan
Try finding all the apartment buildings in the area....find all that have built in the last 10 years. Follow the history on those all the way back to the land purchase.

Your local tax asessor will often be able to pull up all the apartments in their municipality in a second. Give them your criteria...see where it takes you.
 

bmazerolle

Thread Starter
Freshman Member
Joined
Aug 15, 2007
Professional Status
Licensed Appraiser
State
Arizona
Thanks everyone, I appreciate the feedback. Had not given a great deal of thought towards going back yrs in time to find the data (I guess I was stuck on trying to determine if extracting site value from improved sales was a reliable method).
 
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