Blake Matlock Marshal - ICI   The appraisals for Industrial – Commercial – Investment properties contain a wide range of uses. Developers, lenders, homeowners, realtors, investors, lawyers, landlords, farmers, governments, bankruptcy trustees, accountants, sellers and purchasers all need to make decisions based on the value of a property. A professional appraiser can be advantageous with proposed upgrades, renovations, tax appeals, bankruptcy, condominium reserve funds, expropriation, lease analysis, lender financing, insurance, sub-division and replacement costs.

When retaining an appraiser you first need to identify the reason for the appraisal, so that the appraiser may use the right method for valuation which includes collecting information and data on the property together with the appraisers level of experience for the property being appraised. The appraisers examination of the property value usually entails a physical inspection, a review or recommendation to look into matters of legal title, tax assessment, planning, building condition as well and a study of relevant lease agreements for the property. This involves a review of comparison properties, transfers and listings, rental data and replacement costs where required, all used in the determination of highest and best use.

There are three common methods used:

Direct Comparison Approach –  a look at similar properties listed and/or sold,  where the value can be converted into a unit price equivalent, taking into account any differences that may affect the value. The appraiser will describe and classify the property and  select appropriate properties for comparison when reconciling value.

Income Approach – a look at the future income potential of a property with different applications available:

  •  Gross Income Multiplier- A rough measure of the value of an investment property, obtained by dividing the property’s sale price by its effective gross income.
  • Overall Capitalization – the ratio between the net operating income produced by an asset and its expected rate of return.

Cost Approach – a look at replacement cost taking into account depreciation and/or obsolescence. The appraiser would estimate the value of land, estimate the replacement cost of improvements and take into account any depreciation. When a property is highly unique and no data can be uncovered, greater reliance can sometimes be placed upon the findings of this methodology.