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Economics. Appraisal of Historic Property Appraisal Methods: Sales Comparison Approach Income...
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EconomicsEconomics
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Appraisal of Historic Property
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Appraisal Methods:
• Sales Comparison Approach• Income Approach• Cost Approach
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Sales Comparison Approach
• Find recent sales data for comparable properties
• Adjust for differences (age, amenities, location, square footage)
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Income Approach
• Estimate Gross Expected Income• Estimate Operating Expenses• Calculate Net Operating Income• Capitalize income
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Income Approach
• Capitalize income
Gross Income: $500,000Operating Expenses: - 400,000Net Income: $100,000Capitalization Rate 10%
Value= NOI/Cap Rate= $100,000/0.10=$1,000,000
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Cost Approach
• Define all replacement costs• Calculate total cost of complete
replacement
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Economic Analysis
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Pro Forma
• Schedule of all projected cash flows related to a potential project.
• Used to provide analysis of potential returns.
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Efficiency (%):
Net Rentable Floor Square Footage (NRSF)Gross Square Footage (GSF)
Depreciation: Schedule of costs associated with the repair and maintenance of the building. 27.5 Years for Residential
39.0 years for commercial
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Amortization: Schedule of payments needed to retire the principal of the loan.
Term: Length of time the loan will be paid (divided into equal periods).
Interest Rate: Percentage of loan paid as cost of using the funds.
Principal: Remaining balance of the loan
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Annual Debt Service (ADS): Total of interest and principal paid in one year
Net Present Value: current value of all future cash flows.
Internal Rate of Return: annualized rate of all cash flows.
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Loan to Value (LTV) (%):
Loan Amount Total Value of Project
Debt Coverage Ratio:
Net Operating Income (NOI)Annual Debt Service (ADS)
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Payment: determined by using the capital recovery factor
CRF= i (1+i)n
(1+i)n-1
n = periodsi = periodic interest rate
Example: $100,000, i=6%, p=30 years
Payment= $599.55/month
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Economic Incentives
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Economic Incentives
Tax CreditsTax Abatements
Revolving Loan FundsGrants
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Tax Credits
• State and National programs• Separate criteria• Specific market segments• Specific costs covered• May be combined with other programs
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Federal Tax Credits
• Income producing industrial, commercial or rental residential property
• Certified historic structure• 20% of rehabilitation costs: at least $5000 or
the adjusted basis for the property; whichever is greater
• Exterior walls 75%/50%• Interior Structure: 75%• Carry-forward/Recapture
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Utah Tax Credits
• Residential only• Certified historic structure• 20 % of qualified rehabilitation costs of at
least $10,000• Carry-forward/Recapture
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Tax Abatements
• State and Local programs• Separate criteria• Specific market segments• Specific costs covered
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Loan Programs
• Revolving funds• Below market interest rates• Self-replenishing
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Grants
• Federal, State, and Local• No repayment• May require matching funds
COMMUNITY DEVELOPMENT BLOCK
GRANT PROGRAMPRESERVING AMERICA
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