What Makes A Loft A Loft?

[Varinia]

I would love to know from you knowledgeable appraisers how a loft (large open space, often re-purposed from industrial space) is appraised and what are the qualifications for it to be considered 'a loft' (I'm not talking about a built up area in a basic home or apartment).

Is there a separate category for loft? Or do you use apartments as comps?
What if it's a free-standing loft (no other attached units) - do you comp with single family house? Or only other , similar lofts?

Does it have to be a repurposed building or can a loft be newly built? If so, what are criteria that distinguish it from a single family house, other than open space ? (material: brick? built as rectangle?)

Maybe these are stupid questions, but I've always wanted to renovate a loft, so, now I'm getting more serious about it and would love to have feedback.

Thank you

 

[ICT RE]

Loft is mostly a marketing and popular culture term. Not so much on the radar of an appraiser, within the scope of profession at least. Same goes for townhome.

The most important underlying characteristic, pertaining to your question of comparables, would be the legal form of ownership:

Single-family homes (SFH) are (mostly) fee simple.

The individual unit “loft” properties you are describing would be either condominium or cooperative. Co-op would be comped with other co-ops; condo would be comped with other condos. Still individual ownership, just not fee simple like a SFH.

Some “lofts” could be built or repurposed such that fee simple would work/apply I suppose, but I’ve never seen it personally. They would be - more or less - attached SFH’s, from an appraiser’s perspective. These could also fall under the “townhome” moniker mentioned above.

Apartments are just apartments (leased fee interest for landlord on the basis of each individual unit; leasehold interest for tenant), regardless of the fact that they might be built from a repurposed warehouse. The landlord who holds legal title to the apartment as a whole again has their own form of ownership (which varies).

You can google all of these ownerships types fairly easily, and get a feel for the differences much more easily than I can by making a novel-sized post here.

Hope this did not just confuse you further.

 

[Terrel L. Shields]

re-purposed from industrial space

Mezzanine apartments? @ICT RE seems to be describing what I think you must mean.

Typically an appraiser considers a loft an open area above the first floor of a residential home like this and those are generally discounted over the first floor gross living area.​

 

[Varinia]

Thank you for your responses. Let me clarify further and maybe then it makes more sense.

I'm considering buying an old store in my neighborhood, 3700sqf, and converting it into a big loft for myself (not mezzanine apartment, but big open space and possible a loft level within that loft - that's to be seen.

My neighborhood doesn't have any lofts. The highest sold SFH here is 255K (1900sqf). Our neighborhood is exploding right now and values have doubled this past year and will still be going up, due to developments happening here right now.

The neighborhood just north of us (about 1 mile) is nothing but industrial lofts. It's known for them. Some free standing, some in buildings with several - condos as such. +3000sqf lofts around 500-600K.

So, how would an appraiser approach a 3700sqf free standing loft, previously a small store, (yes, I know I'll have to rezone)? Would they pull their comps from the SFH in the neighborhood and say that this is the largest SFH? Or would they pull comps from comparable and similar lofts 1 mile away? Would they compare with condos (regardless of open layout or not?)

 

[glenn walker]

A Commercial or Industrial Building And not A Residential Property. This is common in some areas and known as live and work-units. The upper area is repurposed for say an-Artist or for a small business owner to live and work in the same building. In most cases it's considered a mixed use multi-purpose building and hopefully your City or County has either changed the zoning or given special variances for these uses. ** I see you are not going to live in it but convincing your city-county may be the hard part. So I am going to pretend you are re-purposing to live or rent it out otherwise it has virtually no value.

Also a LOFT in a Commercial or Industrial Building is often called a Mezzanine which is a "second floor," although usually the mezzanine level of a building is a partial floor, located between the ground floor and first floor. Think Hipsters- Artists- And People that don't want to pay for a shop and a house ( I LIKE IT )

As far as a Loft or Mezzanines value its normally just factored into the value of the building as a whole because most are cheap to build and the value is to the user or tenant. We normally just try to find a few similar small Industrial or commercial buildings in these types of areas and give a very minimal value for the Loft or Mezzanine so don't spend a ton of money on the loft . Most can be built using very inexpensive materials- The hardest part is heating and cooling the loft or mezzanine area because it's so open.

Anyway only way to find out is engage a young-cool-commercial appraiser who hopefully also plays weekends in a rock band and is also an-artist, smokes a lot of pot and was raised by an-old guy who attended Woodstock and still listens to Jimmie Hendrix and Janis Joplin. Not trying to be a smart-A but almost everyone I encounter real intention is to live up there and of course they all tell the City-County it's just used for storage otherwise they won't get a permit.

Good Luck- BUT-until you have a signed zone change or variance from your local governmental agencies including fire Marshall- Don't spend a lot of money and make sure you find a good local Real Estate attorney to go over all the paperwork and if you do move into it - Black out the windows and don't answer the door after 5 PM : ) LMAO

 

[ICT RE]

Thank you for your responses. Let me clarify further and maybe then it makes more sense.

I'm considering buying an old store in my neighborhood, 3700sqf, and converting it into a big loft for myself (not mezzanine apartment, but big open space and possible a loft level within that loft - that's to be seen.

My neighborhood doesn't have any lofts. The highest sold SFH here is 255K (1900sqf). Our neighborhood is exploding right now and values have doubled this past year and will still be going up, due to developments happening here right now.

The neighborhood just north of us (about 1 mile) is nothing but industrial lofts. It's known for them. Some free standing, some in buildings with several - condos as such. +3000sqf lofts around 500-600K.

So, how would an appraiser approach a 3700sqf free standing loft, previously a small store, (yes, I know I'll have to rezone)? Would they pull their comps from the SFH in the neighborhood and say that this is the largest SFH? Or would they pull comps from comparable and similar lofts 1 mile away? Would they compare with condos (regardless of open layout or not?)

Fee simple, condo, and co-op are each oil to water as compared to each other, with regards to compatibility as sales comparables. Also, tough to see a circumstance where an appraiser would use traditional SFH’s as comps to what you propose to build, but never say never I suppose.

You would likely need to enlist the skills of a highly qualified Certified General appraiser, be prepared for a hefty fee in the four figures, and be ready for a report that utilizes something other than the traditional Sales Comparison Approach for a final opinion of value, depending on the viability and similarity of the nearby free-standing SFH “lofts” you describe.

IMHO... My $.02... YMMV... etc.

 

[glenn walker]

Fee simple, condo, and co-op are each oil to water as compared to each other, with regards to compatibility as sales comparables. Also, tough to see a circumstance where an appraiser would use traditional SFH’s as comps to what you propose to build, but never say never I suppose.

You would likely need to enlist the skills of a highly qualified Certified General appraiser, be prepared for a hefty fee in the four figures, and be ready for a report that utilizes something other than the traditional Sales Comparison Approach for a final opinion of value, depending on the viability and similarity of the nearby free-standing SFH “lofts” you describe.

IMHO... My $.02... YMMV... etc.

Read the post - It's a old store- not residential , not a condo-house or co-op : )

 

[bnmappraisal]

Thank you for your responses. Let me clarify further and maybe then it makes more sense.

I'm considering buying an old store in my neighborhood, 3700sqf, and converting it into a big loft for myself (not mezzanine apartment, but big open space and possible a loft level within that loft - that's to be seen.

My neighborhood doesn't have any lofts. The highest sold SFH here is 255K (1900sqf). Our neighborhood is exploding right now and values have doubled this past year and will still be going up, due to developments happening here right now.

The neighborhood just north of us (about 1 mile) is nothing but industrial lofts. It's known for them. Some free standing, some in buildings with several - condos as such. +3000sqf lofts around 500-600K.

So, how would an appraiser approach a 3700sqf free standing loft, previously a small store, (yes, I know I'll have to rezone)? Would they pull their comps from the SFH in the neighborhood and say that this is the largest SFH? Or would they pull comps from comparable and similar lofts 1 mile away? Would they compare with condos (regardless of open layout or not?)

Sounds like you have a pretty complex property situation going on there

Honestly, I would recommend hiring a very experienced, local appraiser from the area in question, to answer your question. Highest and Best Use will be a big factor. Although most likely a very experienced residential appraiser may be able to complete the assignment, most likely you will want a commercial appraiser because of the possibility the Highest and Best Use may still be Commercial/Industrial

Again, it sounds like it may be pretty complex and time consuming. I would expect the fee to be at 4 digits

All the best

 

[Varinia]

Thank you all! I didn't realize that it would fall under commercial appraisals, since I'm planning to convert to live/work.

That's good. I have a great Commercial appraiser, that has helped me with a condemnation and is now working for me as a consultant on 2 lots that I own in the middle of a big future development.

I'll check and see what he says.