REE-4103 Chapter Notes - Chapter 22: Operating Expense, Earnings Before Interest And Taxes
2 May 2018
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- Estimating and Adjusting Market Rent
o The rents of comparable properties can provide a basis for estimating
market rent for a subject property once they have been reduced to the
same unit basis applied to the subject property
- Income and Expense Data
o To derive pertinent data an appraiser investigates comparable sales and
rentals of competitive income-producing properties of the same type in
the same market
o Lease Data
▪ Date of lease
▪ Reference information
▪ Legal description
▪ Name of lessor
▪ Name of lessee
▪ Lease term
▪ Occupancy rate
▪ Commencement date
▪ Rent amount
▪ Rent concessions
▪ Expense stop and expense cap clause
• Stop- a lause i a lease that liits the ladlord’s expese
obligation because the lessee assumes any expenses above
an established level
• Cap- a lause i a lease that liits a teat’s share of
operating expenses
▪ Escalation clauses
• Provides for the adjustment of a price or rent based on some
event or index
▪ Escape, kick-out, cotenancy, and buyout clauses
• Escape- provision that allows a tenant or landlord to cancel a
lease
• Kick-out- allows a landlord to cancel a lease upon the
occurrence of a specific event
• Cotenancy- permits tenants to terminate a lease if the
landlord has not replaced an anchor tenant or other
specified tenants
• Buyout- provide for a payment by either a landlord or a
tenant to the other to induce the cancellation of a lease
- Developing Reconstructed Operating Statements
o Potential Gross Income
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