Appraisal Formulas#1 - Calculate Assessment Level

Personal Property Formula

Acquisition cost x cost index= RCN RCN x % good= RCNLD or taxable value RCNLD x .35 = assessed value Assessed value x tax rate= taxes due

Assessment ratio

Assessed value/Market Value

Sales comparison

Composite adjustment= sum of adjustments Comparability= add all adjustments together as positive numbers

Cost Index method

Current index/prior index= multiplier Multiplier X historic cost*= RCN * Historic cost is actual age not effective age

Land rate

Discount rate + effective tax rate Land income divided by land value - IRV - NOI minus building income equals land income

Building rate

Discount rate + recapture rate+ effective tax rate Building income divided by building value - IRV - NOI minus land income equals building income

Age-life depreciation

Effective age/total economic life (effective age + remaining economic life)

GIM price per unit per month

Find the gross income= monthly income x # of units x 12 months Find the GIM= sales price/income

Calculate Discount Rate

Formula : IRV - Overall Rate = NOI / Sales Price (R = I / V)

Calculate Time Adjustment for Comparable Sales

Formula: (Now - Then) / Then = % / # of months elapsed = monthly time adjustment

Calculate Assessment Level

Formula: A = E / T

Calculate Age-Life Depreciation

Formula: Age Life Depreciation = Effective Age / Total Economic Life

Calculating Property Assessed Value

Formula: Assessed Value = RCNLD * Assessment Ratio

Calculate Using the Factored Historical Method

Formula: Current index / prior index = multiplier * historical cost = RCN

Calculating Property Depreciation

Formula: Depreciation = (RCN) Acquisition Cost * Cost Index Factor * (1-% Good)

Calculating Migratory Property

Formula: Fractional Reduction = July 1 - November 1 = 4/12

Calculate the Gross Rent Multiplier

Formula: GRM = Sale Price / Monthly Rent

Income

Formula: Income (I) = Value (V) / Rate (R)

Calculate Rate Using Income Approach

Formula: PGI - Vac & Coll / EGI - Op Expenses / NOI Overall Rate = NOI / Sales Price (R = I / V)

Calculating Property Replacement Cost New (RCN)

Formula: RCN = Acquisition Cost * Cost Index Factor

Calculating Property RCNLD (Taxable Value)

Formula: RCNLD = RCN (Acquisition Cost * Cost Index Factor) - Depreciation (RCN * 1-% Good)

Rate

Formula: Rate (R ) = Value (V) / Sale Price (I)

Calculate Recapture Rate

Formula: Remaining Economic Life = Original Life - Remaining Life Recapture Rate = 1 / Remaining Economic Life

Value Property Using Abstraction

Formula: Sale Price - Improvement Value

Identify Adjustment Factor and Comparability to Subject

Formula: Sum of Adjustments "Composite ADJ Factor" (Time + Location + Size + Condition) Formula: " Comparability" Add all adjustments as positive numbers

Calculate Tax Rate

Formula: T = E / A Budget-Revenue/Total assessed value

Calculating Property Taxes Due

Formula: Taxes Due = Assessed Value * Tax Rate

Valuing Property Using Gross Income Multiplier

Formula: V = GIM * PGI

Value

Formula: Value (V) = Income (I) /Rate (R)

Value

GIM x income Or Value/rent = GRM GRM x rent= value

Calculate the Gross Income Multiplier

Go to example on practice test

NOI= rate x value

I = R x V R= I/V V= I/R

Nominal Tax Rate

Levy amount/assessment amount

Overall Cap Rate

NOI / Sale Price (Value)

Land residual technique calculations

NOI- building income = land income Land income/ land rate = land value

Calculating Adjusted Actual Age

Original Year Built + Addition Year Built / 2 = adjusted age

LV= % land x total value (sales price)

Potential Gross Income (PGI) Less Vacancy and collection loss Plus Other income Equals Effective Gross Income (EGI) "PGI= as if 100% occupied EGI= PGI- vacancy and collections loss NOI= EGI - normal operation expenses and reserves for replacement"

RATIOS

Remember! 4:1 ratio means 1 part land, 4 parts building = 5 parts (divide by 5 not 4)

EGIM

Sales price/EGI

Units of comparison

Sales price/element of comparison (sf, front foot, rooms etc.)

Calculate Effective Tax Rate

Solve for T (T= rate/assessed value) Then, Formula: E=T*A

To calculate acres:

Start with 640 acres (section) Divide by the denominator of each term Make sure to account for each term only once

Calculate Age Life

Step 1: Calculate Accrued Depreciation Accrued Depreciation = Adjusted Actual Age * 1.5% * RCN Step 2: Calculate RCNLD RCNLD = RCN - Depreciation Step 3: Calculate Total Property Value Total Property Value = RCNLD + Land Value Step 4: Calculate Assessed Value Assessed Value = Total Property Value * 35%

Calculate Accrued Depreciation with comparable sales

Step 1: Calculate Subject Property Value Value = Land + Improvements Step 2: Calculate Indicated Accrued Depreciation (Subject - Comparable Sales)

Calculate Accrued Depreciation

Step 1: Calculate Total Economic Life Effective Age + Remaining Economic Life = Total Economic Life Step 2: Calculate Depreciation Depreciation = Effective Age / Total Economic Life Step 3: Calculate Accrued Depreciation Accrued Depreciation = RCN * Depreciation

Calculate Market Rate Adjustment

Step 1: Calculate the price change Formula: Price Change = Current Sale Price - Sale Price Step 2: Calculate the % Change Formula: % Change = Price Change / Sale Price Step 3: Calculate the % Change Per Month Formula: % Change Per Month = % Change / Months Elapsed Step 4: Calculate the Average % Per Month Formula: Average % Per Month = (Sale 1 % Change/Month + Sale 2 % Change/Month + Sale 3 % Change/Month) / 3

Open Space

Taxable value x .74 = open space taxable value Open Space taxable value x .35 = assessed value Open space includes improvements

Assessed Value

Taxable value/ Assessment ratio

Taxable Value

Taxes owed/Tax rate

Calculate Number of Acres From Legal Description (not sure there's a formula but here's an example)

The S ½ of the NE ¼ of NE ¼ contains how many acres? Answer: 1/2 * 1/4 * 1/4 = 1/64 * 640 ac = 10 ac OR 1/2 of 640 = 320 ac ¼ of 320 ac = 80 ac ¼ of 80 ac = 20 ac

Taxes to be paid

Total budget-revenue/total assessed value

Age-life method of depreciation (straight line depreciation)

Total capital to be recovered /number of periods Depreciation for each year is identical.

OER (operating expense ratio)

Total expenses / EGI

Vacancy rate

Vacant units / Total Units = Vacancy rate or Vacant square footage / Total square footage also Billable rent - Collected rent = Uncollected rent Uncollected rent / Billable rent = Collection loss rate

GIM

Value/Income or sales price/PGI

Observed condition method of depreciation

- Physical deterioration o Curable=cost to cure o Incurable Short- life= age-life of short lived items Long-life = age-life of basic structure - Functional obsolescence o Curable = form of cost to cure depending on type o Incurable= market comparison rent loss x GRM - Economic obsolescence o Incurable= Market comparison approach Rent loss x GRM x % building

Net Income Ratio Method

1. Based on dividing the net operating income ratio (NIR) by the effective gross income multiplier (GIM). NIR / EGIM = Capitalization Rate 1. The net operating income ratio: NIR = 100 % - Operating Expense Ratio NIR = NOI / EGI NIR= Net income ratio EGIM= Effective gross income multiplier

Methods of developing overall rate

1. Market comparison - Uses IRV - NOI/sales price= overall rate - Must be from comparable properties 2. Band of investment (mortgage and equity) - Uses mortgage constant and equity dividend rate - Ro = % mortgage x Rm + % equity x Re 3. Net income ratio method - Ro = NIR/EGIM 4. Debt coverage ratio - Ro = DCR x Rm x % MTG

Mill

1/10 of one cent or 1/1000th of one dollar To convert dollars to mills, move the decimal 3 places to the right