Class Organization

u   Primary texts

u   Supplementary texts

u   Project(s)

u   Grading

u   Attendance policy

u   Professional designation credit

What is appraisal?

u   "...a supportable, defensible, estimate of [the most probable selling price]"

u   What should you sell for?

u   What should you buy for?

u   Appraisals provide information for decision makers.

What is Income Property Appraisal?

u   The appraisal of income producing properties like:

u  Apartments

u  Retail properties

u  Industrial properties

u  Office properties

u  Warehouse properties

u  Recreational properties

u  Hotel/motel properties

How Does Income Property Appraisal Differ from Residential Appraisal?

u   The primary difference is the motivation of the property owner is the profit motive.

u   Income property appraisal is less influenced by non-economic motives, unlike residential properties.

u   Income property appraisal is less impacted by transactions that are not arms-length.

Approaches to Income Property Valuation

u   Cost-Depreciation

u  Used primarily for very new properties

u  Used for special function properties (e.g. a glass plant)

u   Sales-Comparison

u  Used primarily for apartments, small office properties, and small retail properties.

u  Requires an adequate number of comparable properties that have been sold recently.

Income-capitalization Approach

u   Single period (stabilized) valuation models

u  Uses formula Value = Net Operating Income Overall Rate

u  Assumes constant rates of change in income

u  Stable tax environment

u   Multi-period valuation model

u  Allows application of different risk adjusted rates applied to different cash flows.

u  Allows uneven cash flows