Self Storage Review

Commercial Real Estate Appraisal

Commercial real estate appraisal is a combination of art and science. Knowledgeable appraisers gather and analyze data prior to making informed decisions about real estate value. The appraisal profession has developed a series of well-established analytical techniques; the cost approach, income approach and sales comparison approach. The most appropriate approaches depend upon the characteristics of the subject property.

The cost approach is considered most applicable for commercial real estate appraisals for relatively new properties and special-use properties. Commercial real estate appraisers are less likely to use the cost approach for older properties due to the difficulty of precisely calculating the amount of depreciation.

The income approach is considered most applicable for investment or income properties. Appraisers gather data regarding the actual income and expenses for the subject property, rental comparables, expense comparables, industry expense data, market occupancy, and rental market trends. The commercial real estate appraiser then estimates gross potential income, other income, effective gross income, operating expenses, and net operating income. Net operating income is converted into an indication of market value using a conversion factor termed the capitalization rate, using the following formula:

Market value = net operating income/capitalization rate. This process is termed direct capitalization.

The income approach can also be calculated using a discounted cash flow analysis. Revenue and expenses are estimated for a period of years and the resulting annual cash flows and gross proceeds from a projected sale of the property are discounted to a present value using a discount rate.

Commercial real estate appraisers also utilize the sales comparison approach to estimate market value. The sales comparison approach is often considered most comparable for owner-occupied properties. After obtaining data regarding similar properties that recently sold, the appraiser makes adjustments to generate an indication of market value for the subject property.

After considering each of the three approaches to appraisal and preparing an analysis for the approaches which are considered relevant, the appraiser reconciles the indications of value to a final value conclusion. The quality and quantity of data for each of the approaches is considered when reconciling to a final value conclusion.

O’Connor & Associates is the largest independent appraisal firm in the southwestern United States and has over 40 full-time staff members engaged full-time in valuation and market study assignments. Their expertise includes valuing commercial real estate, single-family, business personal property, business enterprise value, purchase price allocation for businesses, valuation for property tax assignments, partial interest valuation, estate tax valuation, expert witness testimony and valuation for condemnation. They have performed over 20,000 commercial real estate appraisals since 1988.

To obtain a quote or further information for a commercial real estate appraisal, contact either George Thomas or Craig Young at 713-686-9955 or fill out our online form.The appraisal division of O’Connor & Associates is a national provider of commercial property real estate appraisal services including cost segregation studies, due diligence, insurance valuations, business personal property valuations, business purchase price allocations, single family litigation support and business valuations.

All commercial property types benefit from our appraisal services including multi-family housing, retail stores, hospitals, hotels, industrial properties, manufacturing facilities, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas and warehouse/distribution centers.

Steel containers make excellent containers. Whether these are steel drums, pails or huge shipping containers, steel is an excellent choice for making containers.

Unlike plastic, steel containers can be recycled. Shipping containers are recycled by converting them into useful structures or storage containers for use onshore. When these structures are at the end of their useful lives, they can be recycled again as scrap steel used in producing new steel.

Shipping Containers

Usually made with high tensile steel that also has rust inhibiting properties, shipping containers are reinforced with a rigid steel framework. The sturdy construction enables the shipping containers to withstand the extreme conditions it can be exposed to during long ocean voyages.

Shipping containers are large structures with standard dimensions. They have a common cross section of 8′ width and 8.5′ height, and come in lengths of 20′, 40′ and 45′. In fact, cargo capacity is expressed in TEUs, or twenty-foot equivalent units, each unit representing a twenty-foot standard shipping container. Thus a 40-foot container will be two TEUs.

The sturdiness of the shipping container makes it ideal for many other uses when they become surplus. They can become surplus either at the end of their ocean-worthy life or because empty containers accumulate at certain places and begin to cause problems.

Alternative Uses for Steel Shipping Containers

Wherever a compact and secure enclosed space is required, these steel containers provide a good solution. They are constructed to be as vandal and thief proof as possible, and using padlocks and other aids can increase their security further. Let us look at a few alternative uses for the steel containers.

LIVING SPACE: Doors can be modified and windows can be cut in the steel walls to start the process. Internal partitions, fold up beds and furniture, toilet and washroom units and working areas can make the steel containers into living units at worksites. And these mobile houses can be transported from site to site using the container trucks.

SELF-STORAGE UNITS: With increasing clutter in households and offices, the demand for independent storage spaces is growing. Steel containers can be converted into self-storage units with a minimum of work. Self-storage units are attractive storage solutions because they give control to the hirers. Hirers can use their own lock and key, and move things in and out whenever they want.

WORK CANTEENS: With a kitchen unit, food service counters, and other essential facilities, the steel containers can become canteens at work sites. The containers can also be converted into worker rest rooms, offices and data centers.

MARKET STALLS & MULTI-LEVEL SHOPS: The steel containers can be converted into mobile market stalls. By stacking the containers, and providing connecting stairs, you can even create multi-level shops.

Steel shipping containers typically have treated-wood insides and can be fitted up to provide pleasing or otherwise suitable interiors. Lighting and heating facilities can be provided with internal fittings, and power can be availed through either an external plug or solar electricity generation facilities.

Design possibilities are numerous. The walls and roof of the steel containers can be removed to make them into flat racks that provide easier loading for many materials, and are easier transport when empty (several empty units can be stacked for transport).

Steel containers are indeed ideal when you want sturdy and secure solutions.

The Approaches to Establishing Property ValueSales Comparison ApproachThe sales comparison approach is used at property tax hearings for houses, land and owner-occupied buildings. It is sometimes used for income properties as a secondary method of valuation. To perform the sales comparison approach you need information on sales of property similar to your property. You can obtain this information from a variety of sources including the appraisal district, real estate appraisers, brokers and third party vendors. Inspect and photograph the comparable sales making detailed notes regarding differences between the comparable sales and your property. Then make adjustments for differences between the subject property and comparables. Adjust comparable sales to the subject property. For example, if a comparable sale has four bedrooms and your home has three bedrooms, make a downward adjustment to the sales price to the comparable sale to bring it down to the level of your house. Select sales as similar as possible to the subject property to minimize adjustments. Comparable sales data is given strong consideration in property tax hearings for houses, land and owner-occupied commercial buildings.Income ApproachThe income approach is typically used for income properties. The basic theory is that investors purchase income properties for the income stream they produce. This income stream can be converted to an indication of market value for the property. The primary steps in the income approach are to estimate the potential gross income using rent comparables and information regarding actual income at the subject property. An allowance for vacancy is estimated based on the performance of the subject property and average vacancy in the area. Operating expenses are estimated using actual expenses at the subject property and market expenses for similar properties. The net operating income is calculated by deducting vacancy and operating expenses from the potential gross income. Net operating income is converted to an indication of market value by dividing it by the capitalization rate. Cost ApproachThe cost approach is not typically used at property tax protest hearings except for new buildings. Appraisal districts often use the cost approach for properties up to two or three years old. After that, they typically use either the sales comparison approach or income approach depending on the type of property. The appraisal district will apply the cost approach for a new property by adding the market value of the land (typically the purchase price) to the construction costs for the building. In addition, they may add an allowance for soft costs and for entrepreneurial profit. If the sum of land and construction cost exceeds the appraisal district’s assessed value, it is unlikely they will reduce the assessed value in the property tax hearing. However, if the sum of land and construction cost is less than the appraisal district’s initial assessed value, providing this information at the hearing will likely generate a reduction in your assessed value and property taxes.Uniform and Equal ApproachThe Texas Property Tax Code was amended in 2003 to allow property tax for property owners to protest based on “a reasonable number of comparable properties appropriately adjusted.” This new section of the Texas Property Tax Code allows a protest based on a limited number (perhaps 3 to 10) of assessment comparables. Some appraisal districts agree and are considering protests under the section. Others have chosen to interpret this section differently.To prepare a protest using Uniform and Equal, gather data on assessed values for property similar to your property. Make adjustments for significant differences between the assessment comparables and your property. This can include items such as building size, land size, number of bedrooms, number of bathrooms, size of garage, site influences, age, etc. Make negative (downward adjustments) to an assessment comparable for items that are superior in the assessment comparable. For example, if the assessment comparable has four bedrooms and your house has three bedrooms, make a downward adjustment to the assessed value for the assessment comparable for this item. After applying appropriate adjustments to the assessment comparables, calculate the median level of assessment for the assessment comparables. The median is the middle data point after the adjusted assessment comparables are arrayed in order of increasing or decreasing (on a per square foot value basis). Multiply the median per square foot assessed value times the size of your property (improved area) to calculate the value your home should be assessed for based on Uniform and Equal. Section 41.43 of the Texas Property Tax Code provides you the opportunity to protest using this methodology. However, don’t be surprised if your local appraisal district is not receptive to this method of protest. The appraisal division of O’Connor & Associates is a national provider of commercial property real estate appraisal services including cost segregation studies, tax deductions, cost segregation, due diligence, insurance valuations, business personal property valuations, business purchase price allocations, and single family litigation support. All commercial property types benefit from our appraisal services including multi-family housing, retail stores, hospitals, hotels, industrial properties, manufacturing facilities, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas and warehouse/distribution centers.