Site Valuation Flashcards
A site is currently rented for $600 per month and the ground rent capitalization rate is 7.5%. What is the indicated value of the site?
96000
Basic Formula:
V=I/R
R = annual basis
$600 x 12 / 7.5% = $96,000
.075!
A property sold for $120,000. An old building on the property has a cost new of $300,000 and it is 75% depreciated. What is the indicated site value by extraction?
45000
$120,000
Minus depreciated value of Improvements $75,000
= Land Value $45,000
$300,000 x 25% = current value of improvements = $75,000
How many feet are 4 chains and 30 links?
284 feet
[(4 x 66) + (30 x .667)].
A lot contains .74 acres of land. How many SF is that?
1 ac = 43,560 SF
0.74 ac = x
43,560 x 0.75 = 32,234 SF
How many acres does it include (the numbers are in feet)?
Rectangle A = 60 x 60 = 3,600 SF
Rectangle B = 110 x 120 = 13,200 SF
Triangle C = 20 x 110 / 2 = 1,100 SF
Total 17,900 SF
17,900 SF / 43,560 = .41 acre
A site has 4.7 acres. You analyze the market and determine it could have four possible uses that would be legally permitted, physically possible and financially feasible. Which one would be the highest and best use of the site?
A. Used as a site for a large single unit house it would be worth $150,000.
B. Used as a site for 2 duplexes, it would be worth $40,000 per unit.
C. Used as a site for a small medical center, it would be worth $35,000 per acre.
D. Used as a site for an office complex, it would be worth $25 per SF of rentable space. It could support two buildings that each measure 40’ x 85’.
A. Present value = $150,000
B. 4 units X $40,000 = $160,000
C. 4.7 acres x $35,000 = $164,500
D. 40’ x 85’ x 2 buildings =
6,800 SF x $25 = $170,000
Therefore Alternative D is the highest and best use. It produces the highest return to the site.
An old deed describes a property as being 8 chains and 12 links by 4 chains and 48 links. How many acres are in the property?
8 chains = 66 feet x 8 = 528 feet 12 links x .667 feet = 8 feet Total 536 feet
4 chains = 66 feet x 4 = 264 feet 48 links x .667 feet = 32 feet Total 296 feet
536 feet x 296 = 158,656 158,656 / 43,560 = 3.64 acres
Another old deed says a property is bounded on the north by Smith and then runs easterly along that line for 46 poles; then it runs southerly for 72 poles along the lands of Johnson; then it runs westerly along a line parallel to the first line for a distance of 46 poles also along the lands of Johnson; and thence it returns in a northerly direction along the lands of Roberts to the point and place of beginning. If the property is worth $12,000 per acre, how much is it worth?
46 poles x 16.5 feet = 759 feet
72 poles x 16.5 feet = 1,188 feet 759 feet x 1,188 feet = 901,692 SF 901,692 SF · 43,560 = 20.7 Acres 20.7 acres x $12,000 = $248,400
A rancher owns 5 full sections, 3 half sections, 5 quarter sections, and 7 quarter-quarter sections. How many acres does she own?
5 full sections x 640 acres = 3,200 acres
3 half sections x 320 = 960
5 quarter sections x 160 = 800
7 quarter-quarter sections x 40 = 280
5,240 acres
Look at the site below and then answer the questions that follow. The dimensions are in feet, and both sides of the property are symmetrical.
A. How many square feet are in the site?
B. How many acres?
C. If it sells for $150,000, how much did it sell for per square foot?
D. How much did it sell for per acre?
A. Rectangle 312 x 348 = 108,576 SF
Triangles 2 x 158 x 348 ÷ 2 = 54,984 SF Total
163,560 SF
B. 163,560 SF ÷ 43560 = 3.75 acres
C. $150,000 ÷ 163,560 = $.92
D. $150,000 ÷ 3.75 = $40,000
A run-down neighborhood grocery store on a good corner location in a desirable older neighborhood recently sold for $400,000.
The reproduction cost of the improvements today would be $250,000 and the total depreciation is estimated to be 80%.
By extraction, what is the land value?
Extraction Method
$400,000 Sale Price
$250,000 Cost New = 100%
x = 20%
= $50,000 depreciated value of Improvements
$400,000 Sale Price
Minus $50,000 Improvements depreciated
= $350,000 land value
You are having a hard time finding sales of vacant land in an established built-up residential area. You have found some sales of improved property that include sites similar in size to your subject property. Through research into properties of this type in the subject market, you are able to conclude that typically 30% of the total value is in the land and the rest in the improvements.
You have good comparable sales that indicate the total value of your subject property, as improved, is $180,000.
By the allocation method, what is your opinion of the value of the subject site?
Allocation Method
Simply multiply $180,000 by .30 and the answer is $54,000.
The subject improved property has a total value of $300,000 by the sales comparison approach.
One neighborhood across town has home sales from $260,000 to $270,000, and recent lot sales averaging $63,000.
Another nearby neighborhood has $340,000 home sales, and recent lot sales of $70,000.
A builder in the area says his lots typically run about 25% of total value on new construction.
Based on the above data, what value would you conclude for the subject’s land?
Allocation Method
$63,000 / $265,000 = .24 or 24%
$70,000 by $340,000 = .21 or 21%
The indication from the builder is 25%.
$300,000 x .21 = $63,000 $300,000 x .24 = $72,000 $300,000 x .25 = $75,000
Therefore, the indicated value of the subject lot ranges from $63,000 to $75,000. We could use a value range ($63,000 - $75,000) or we could reconcile this range to a single-point estimate (e.g., $70,000).
Let us assume a property where the net operating income (NOI) is $100,000. The appropriate cap rate to be applied to the building improvements only was 11%, and the building value is $800,000. Land cap rate of 8%.
What is the land value?
Land Residual
$800,000 building value x .11 = $88,000 of the total income stream must be utilized to produce the appropriate return to the building.
$100,000 NOI - $88,000 = $12,000 portion of the income that is attributable to the land.
That means someone investing in land would expect an 8% return on their investment.
$12,000/0.08
= and the indicated land value is $150,000.
We have a ground rent of $135,000 and a market derived rate of 9%. What is the value of the land?
Ground Rent Capitalization
$135,000 ÷ .09 = $1,500,000.
