Problems with a real estate appraisal? Tell us about it. – Milwaukee Journal (Real Estate Appraisal) Sentinel

Problems with a real estate appraisal? Tell us about it. – Milwaukee Journal Sentinel
The $34 million debt came from the county underfunding its pension fund over the past five years. The payback would boost the county’s overall pension contribution next year to about $75 million, when combined with the county’s regular 2010 pension

New appraisal rules are raising questions – Knoxville News Sentinel
JOHNSON CITY Veteran real estate appraiser and avid golfer John Bullington isn t talking tee times these days. Instead, he s shouting Fore! over new legislation called the Home Valuation Code of Conduct that took effect May 1. The

Father’s footsteps: Dad showed us the way in real estate business – Naples Daily News
My name is Don Ward, Jr. and I have followed the same career path as my father. While attending college in Maryland, I worked for my father at his Washington DC real estate consulting company in the summers and on breaks. At the early age of 17 we

Real Estate Appraisal – Falling Values Hit Real Estate – Vineyard Gazette

Falling Values Hit Real Estate – Vineyard Gazette
Historic low interest rates that have led to a flood of mortgage refinancings in recent months have by accident exposed a marked trend of slumping property values on the Vineyard. In roughly 75 per cent of June home reappraisals conducted on behalf

Father’s footsteps: Dad showed us the way in real estate business – Naples Daily News
My name is Don Ward, Jr. and I have followed the same career path as my father. While attending college in Maryland, I worked for my father at his Washington DC real estate consulting company in the summers and on breaks. At the early age of 17 we

Appraisal rules wreck real estate deals – Steamboat Pilot & Today
Steamboat Springs Local lenders, real estate agents and appraisers are bemoaning recently enacted appraisal regulations that have frustrated an already difficult market and spoiled potential sales, refinancings and efforts to access home-equity

Real Estate Appraisal – Real Estate Valuation

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Real estate valuation for single family homes is typically done by using comparable sales. With income properties this just doesn’t work well. Imagine if you are looking at a 24-unit building. It would be difficult to find similar ones nearby that have recently sold.

It’s also not ideal to use replacement costs for income property appraisal. How do you figure replacement cost if there is no land for sale nearby with proper zoning? This is used as a secondary method, though, and can tell you if maybe you should be building instead of buying.

Real Estate Valuation By Cap Rate

Income properties are bought for the income. Income, then, is what is used to determine value. The rate of return investors in a given area expect gives you the capitalization rate, or “cap rate” for the area. This is what you use to accurately appraise an income property. Below is a somewhat simplified explanation.

The process begins with the gross income of a property. You then subtract all expenses, but not loan payments. For example, if a building’s gross income is $82,000 per year, and the expenses $30,000, you have a net (before debt-service) of $52,000. You then apply the capitalization rate to this figure.

Suppose the acceptable cap rate in the area is .10, for example (ask a real estate agent), meaning investors expect a return of 10% on the value of the property. You simply divide the income of $52,000 by .10. $520,000, then, is the indicated value of the building. Suppose the usual rate is .08, meaning investors in the area expect an 8% return. Then the value would be $650,000.

Easy Real Estate Valuation?

Take net income before debt-service, and divide by the “cap rate:” It’s a simple formula. However, the tough part is getting accurate income figures. Did the seller show you ALL the normal expenses? Did he and exagerate the income? Suppose he stopped repairs for a year, and also showed you the “projected” rents. In that case, the income figure could be $15,000 too high. The building would be worth $187,000 less (.08 cap rate) than your appraisal shows.

One thing smart investors do when buying, is to separate out income from vending machines and laundry machines. If these provided $6,000 of the income, that income would add $75,000 to the appraised value (.08 cap rate). Instead, do the appraisal without this income included, then add back the replacement cost of the machines (probably much less than $75,000) to arrive at a valuation.

Of course, you should be careful with any real estate appraisal method. There is no perfect appraisal method, and all are only as good as the figures you plug into them. If used wisely, though, appraisal by capitalization rates is one of the most accurate methods of real estate valuation.

About the Author

Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com

Father’s footsteps: Dad showed us (Real Estate Appraisal) the way in real estate business – Naples Daily News

Father’s footsteps: Dad showed us the way in real estate business – Naples Daily News
My name is Don Ward, Jr. and I have followed the same career path as my father. While attending college in Maryland, I worked for my father at his Washington DC real estate consulting company in the summers and on breaks. At the early age of 17 we

Monitor questions Randolph pastor’s proposed pay raise – Recorder Community Newspapers
RANDOLPH TWP. — Despite the recommendations of a state-appointed fiscal overseer, officials of the beleaguered Randolph Christian Church still want to give Pastor Eric Simons a raise that almost doubles his annual salary. Not only that, they want to