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  • OLDER RESIDENCE

Neighborhood analysis. In addition to the points covered under new residence, the following should be carefully considered when dealing with an older property in a built-'up neighborhood:

A. Neighborhood trend.

  1. A check should be made to determine if proposed zoning changes are being considered by the local government.
  2. Contemplated changes might indicate that the best use of the subject is no longer thought to be for single family housing.

B. Inspection of property. In addition to the items covered under the new residence, consideration should be given to the following:

  • 1. A more careful inspection is made of the premises.
  • a. Note effects of dry rot and termites.
  • b. Look for deferred maintenance.
  • c. Inspect roof and attic for signs of water leaks.
  • d. Check foundation for settling.
  • 2. Room arrangement and functional utility.
  • a. An older home is more likely to have an out-of-date floor plan.
  • b. The livability or utility is often obsolete as compared to a newly designed structure.
  • 3. Wiring and plumbing.
  • a. Is the home under-wired for today's electrical appliances? Particular attention should be given to the kitchen.
  • b. Are the plumbing lines being affected by encrustation? Will they have to be replaced shortly?
  • c. Are the plumbing fixtures in the kitchen and bathrooms adequate and in good working condition?
  • 4. Heating plant and/or air conditioning unit.
  • a. Is unit(s) sufficient for size and quality of house?
  • b. What would be entailed to install a new or more efficient unit? Would it be feasible?

C. Application of approaches. Each approach may be used in valuing an older property. The primary difference between valuing a new and old home is in the determination of depreciation as part of the cost approach.

  1. Consideration must be given to the inspection of the home in order to help the appraiser reach an opinion as to the effective age to be assigned.
  2. Physical curable deterioration must be calculated with care.
  3. Study must be made to determine if a functional item may be treated as curable or incurable.
  4. Items of economic depreciation will be more prevalent in an older neighborhood than a newer one.

 

Definition of small multi-family dwelling.

A. In most instances, a small multi-family dwelling refers to a property which contains more than one but less than six living units. These units may be one of the following:

  1. Double bungalow or duplex.
  2. Triple bungalow or triplex.
  3. Small courts or numerous houses on a lot.
  4. Flats or small apartments.

Reasons for purchasing residential properties.

A. There are three categories of residential properties.

  1. Single family homes.
  2. Small multi-family dwellings.
  3. Income producing multi-family dwellings.

B. Single family homes.

  1. Primary concern is given to amenities of home ownership.
  2. Cost of ownership is of secondary importance.
  3. Pride of location and architectural appeal is given consideration before purchasing.

C. Small multi-family dwellings are purchased for a combination of home ownership and income.

  1. Location, architectural attractiveness, and the amenities of ownership are given strong consideration by a purchaser.
  2. Income is of secondary importance.
  3. Typically, a buyer hopes to be able to reduce the cost of living by obtaining some rental income to decrease expenses.
  4. The income received tends to offset real estate taxes, insurance, and maintenance costs.
  5. In some instances, rental income will also cover mortgage payments on the property.
  6. Usually, the owner of a small multi-family dwelling must do all management work.

D. Income producing multi-family dwelling.

  1. Large multi-family dwellings (above 10 to 15 units) are purchased primarily for the income stream to be produced.
  2. The net income or spendable income is the most important item considered by the buyer.
  3. Amenities of ownership have little influence in the buying decision.

E. Other reasons for purchase.

  1. Hedge against inflation.
  2. Means of forced saving.
  3. Chance for appreciation in value due to increasing demand in the area.

 

Appraisal procedure.

A. Small multi-family units are appraised approximately the same as single family homes.

B. Cost factors, depreciation and estimates of land value are calculated in the same manner as with single family homes.

C. Small units cannot be considered as true income producing units. Therefore, in most instances, monthly gross multipliers are used instead of an income approach to value.

D. The market comparison approach differs to some extent from the comparative approach as used with homes.

  • 1. Less emphasis is placed on attempting to measure pride of ownership and amenities.
  • 2. The comparison approach can be refined to a greater degree.
  • a. Comparisons may be made on a per unit basis.
  • b. Comparison can be made on a per room basis.
  • 3. The appeal of the units from a renter's standpoint must be considered.
  • 4. The location factor as it relates to transportation and shopping may be given greater consideration than with a single family home.

Amenities of multi-family dwellings.

A. Factors and amenities considered important by tenants of multi-family dwellings.

  1. Distance from employment centers.
  2. Public transportation.
  3. Distance to good shopping.
  4. Distance to parks and recreation.
  5. Distance from nuisances.
  6. Rent levels.
  7. Pride of ownership.
  8. Adequacy of off-street parking.

B. Factors considered important by the owner.

  1. Police and fire protection, rubbish collection.
  2. Vacancy rates in the area.
  3. Amount of taxes.
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