Vacant Land

[Kman]

I have been asked by a private party if I can do an appraisal on a vacant lot. What he wants is an appraisal to show what income the property could property produce. His neighbor who has a daycare has been using his lot for her daycare and parking cars. He would like an appraisal showing what income the neighbor owes her. Not sure how to put real numbers on an appraisal showing loss of income. Any ideas?

 

[Dublin ohio]

I have been asked by a private party if I can do an appraisal on a vacant lot. What he wants is an appraisal to show what income the property could property produce. His neighbor who has a daycare has been using his lot for her daycare and parking cars. He would like an appraisal showing what income the neighbor owes her. Not sure how to put real numbers on an appraisal showing loss of income. Any ideas?

I wouldn't touch that assignment. Sounds like a job for a CR. Nonetheless it sounds like you could get caught in the middle of a mess

 

[Red Flint]

One way is to include a market rent analysis entirely with the H&BU section when you are comparing most financially feasible options and conclude with the numbers there. If there are no rent comparables, another way is to assume a 10 year holding period with no reversion, value the property, and split the annual income to the land as the most probable return needed to compete with alternate uses.

 

[jay trotta]

I have been asked by a private party if I can do an appraisal on a vacant lot. What he wants is an appraisal to show what income the property could property produce. His neighbor who has a daycare has been using his lot for her daycare and parking cars. He would like an appraisal showing what income the neighbor owes her. Not sure how to put real numbers on an appraisal showing loss of income. Any ideas?

IMO- at this point he has no agreement for rent?? Lots of questions as to why he has allowed any "use" without some type of agreement, verbal or otherwise. Does she actually "Owe" anything??
should you decide to move forward, I would try to find a CG to collaborate with, and price the work accordingly.

 

[Gobears81]

He would like an appraisal showing what income the neighbor owes her. Not sure how to put real numbers on an appraisal showing loss of income.

This statement makes me think that the client is pushing the bounds of the appraisal side into work that an attorney would handle. A market rent analysis, similar to what Red Flint mentioned, may help the client, but I'd be careful about outlining the parameters of the SOW for this assignment.

 

[WestMichiganCG]

I would find a Certified General Appraiser for the work. There are a number of ways to find the parking lease rates. They are done for the Department of Transportation all the time for grading permits. You just need to have an understanding of value and capitalization rates.

 

[Surf Cat]

His neighbor who has a daycare has been using his lot for her daycare and parking cars. He would like an appraisal showing what income the neighbor owes her.

The black bold part above; he needs a fence. The red part; he needs a lawyer.

If it's a commercial zoned lot, he needs an AG/CG if he wants an appraisal as WestMichigan suggests above.

As Dublin suggests..... I wouldn't get in the middle of this.

 

[George Hatch]

I have been asked by a private party if I can do an appraisal on a vacant lot. What he wants is an appraisal to show what income the property could property produce. His neighbor who has a daycare has been using his lot for her daycare and parking cars. He would like an appraisal showing what income the neighbor owes her. Not sure how to put real numbers on an appraisal showing loss of income. Any ideas?

All RE is local, so what applies in this situation might not apply elsewhere.
In this region daycare operations are sometimes operated out of SFRs with residential or office zoning. If you're a CR then my guess is that the reason you were contacted may possibly involve such a situation, otherwise if the site was zoned to allow non-residential they might have approached a CG to appraise instead.

Just in general, vacant properties being rented or leased for parking and open storage and the like are commonly rented at a percentage of their overall value. Common in this area for that percentage to range from 5% to maybe as high as 10% for the premium and most profitable locations. What you would be looking for in rental data would be locations with comparable retail or office exposure. Office-centric locations tend to be less sensitive to retail exposure (traffic counts and such) and will usually have lower pricing and less aggressive ROIs when compared to retail location such as a gas station or fast food unit would command.

If operating off a percentage of the parcel value then valuing the parcel itself becomes part of that analysis. If this parcel has zoning other than for SFRs then that increases the level of complexity in selecting and analyzing comparables.

None of the steps in this type of analysis is particularly difficult but by the same measure they involve a learning curve - nobody is born knowing how to value a vacant parcel or finding land rental data. If you haven't yet learned how to perform one of these steps then you'll need to get it together before you complete this assignment. It's doable, but it will require more time/effort than the fee will economically justify, which is true whether it was a CR doing it or a CG. So if you're doing it for the money then you might end up being unhappy with how that works out. OTOH if you're doing it for the learning experience then this could be a good experience for you.

 

[George Hatch]

BTW, I've been doing this for a long time and I doubt I have ever cleared a profit when appraising a land lease situation - not when compared to spending the same amount of time on what I normally do. These are a PITA, primarily due to the difficulty in finding relevant rental data. I only take these assignments on as a service to an existing client, not to make money.

Here's what the math could look like

$200,000 (value of the parcel)
* .07 (could be higher for a signalized intersection or lower for a residential subdivision location)
----------
$14,000/yr rent

You would need to extract the rate of return from other land rentals, each requiring a value of that property. Each selected for general location influences. Whatever you do, don't pull that rate out of thin air. ESPECIALLY if there are lawyers involved.

 

[glenn walker]

Run don't walk...lol )