cabarrus county board of commissioners regular meeting november ...

October 17, 2011 (Regular Meeting)PageANNUAL GROSS INCOME MULTIPLIER APPLICATIONTypical comparable sale price $150,000Typical comparable gross annual income $2,400Gross Income Multiplier (GIM) 62.5Subject parcel gross annual income $2,700Estimated Value $168,750Care must be exercised in the use of gross income multiplier. This method isonly applicable where there is a high degree of comparability of propertiessold in the market to the property being appraised. There must also be asufficient number of qualified sales of comparable properties since a soundmultiplier cannot be determined from only one or two sales.OVERALL RATEThis is the most applicable method to use in Revaluation Projects. TheOverall Rate is the ratio of NOI to present worth of the property. Overallrates are expressed as an annual percentage rate and are most effective whenderived directly from market sales.GIVEN - Gross Annual Income = $30,000Vacancy/Rent Loss = 5%Expenses = 30%OVERALL RATE FROM MARKET = 10%Gross Annual Income $30,000Less Vacancy/Rent Loss - $1,500Less Expenses - $8,550Net Annual Income $19,950Divided by Overall Rate .10Total Present Value $199,500INCOME APPLICATION PLICATION TABLEAPPLICATION DESCRIPTION CODEREQUIRED DATAAPPLICABILITY#1 Land Residual LRST1- Net AnnualIncome Short-term lease &Straight Line 2- Current Bldg.Value rental properties. New3- Remaining Economic Life or nearly new buildings.(Known building value.)#2 Land Residual LRLA1- Net Annual Income Long-term lease & newPresent Value 2-Current Bldg. Value or nearly new buildings.or Discounted 3-Remaining Economic Life (Known building value.)Cash Flow 4-Discount Rate#3 Building ingBRST1- Net Annual Income Short-term lease & rentalResidual, 2- Current Land Value properties. (Known landStraight-line 3- Remaining Economic Life value.)4- Discount Rate#4 Building BRLA 1- Net Annual Income Long-term lease & good landResidual 2- Current Land Value comparables. (Known landPresent Value 3- Remaining Economic Life value.)4- Discount Rate#5 Property PRLA 1- Net Annual Income Long-term lease, overall rateResidual with 2- Current Land Value obtained from comparable sales.land reversion 3- Expected Land Grow Rateat the end of period 4- Discount Rate5- Remaining Economic Life#6 Ellwood Mortgage EQTY 1- Net Annual Income Sophisticated, short-termEquity 2- Investment Period (5-10 yr.), investors, recent3- Mortgage Term refinancing and current4- Annual Mortgage Rate dependable growth forecast.5- Loan to Total Ratio6- Desired Yield7- Expected Appreciation (+)or Depreciation (-).#7 Annual Gross AGIM 1- Gross Annual Income Sufficient sales with a highIncome Multiplier 2- Annual Gross Income degree of comparability toMultiplierestablish a reliable AnnualGross Income MultiplierOVERALL RATES (OAR) 2012 REVALUATIONDRAFTFTThe following chart contains typical overall rates and expense ratios for usein performing standardized income appraisals. The expense ratio ranges arefor use on properties where the gross lease is the most likely leasearrangement, when net, double net or triple net leases are in order theexpense ratio will need to be adjusted. These expense ratios includeA-1Page 135