Excess Rent Should Be Included in Property Valuation: The Appraisal Journal
June 28, 2016 08:00 AM
CHICAGO (June 28, 2016) – Rent that is higher than the market rent for a property, known as excess rent, amounts to an intangible asset and should be specifically identified by real estate appraisers, according to an article published this week in The Appraisal Journal.
The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.
“Is Excess Rent Intangible?,” by Stephen D. Roach, MAI, SRA, AI-GRS, reports that the amount of rent paid to occupy and use property is established by the lease or contract, and therefore is not an asset of the property itself. As such, excess rent should be classified as an intangible asset and specifically identified as such in valuations. Identifying excess rent as an intangible asset may impact property tax assessments, income tax calculations and secured lending.
Roach’s appraisal work has included assignments throughout the United States. He holds a bachelor’s degree in real estate from San Diego State University, and has extensive deposition and trial testimony experience. Roach is a contributing editor to 10 Appraisal Institute books and more than 20 courses and seminars.
Read “Is Excess Rent Intangible?” in the Spring issue of The Appraisal Journal.
Also in The Appraisal Journal’s Spring 2016 issue:
“Appraisal of Underground Natural Gas Storage Rights in Depleted Reservoirs,” by Bernie Shaner, MAI, SRA, discusses the market value of underground natural gas storage reservoirs and outlines a method for appraisers to use when generating an opinion of value on such properties.
“The ANSI/BOMA Z65.4 Measurement Method for Multi-Unit Residential Buildings,” by Byron Miller, SRA, AI-RRS, explains the ANSI/BOMA Z65.4-2010 method for measuring the area of a multi-unit residential building with four or more units and outlines how the standard can be useful in providing consistent measurements of multi-unit buildings.
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The Appraisal Institute is a global professional association of real estate appraisers, with nearly 20,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at www.appraisalinstitute.org.