A California appraiser is determining the appropriate vacancy rate for a 20-unit apartment complex in San Jose. The property has had a consistent 2% vacancy rate over the past three years, but the market vacancy rate for comparable properties in San Jose is 5%. Which vacancy rate should the appraiser use in the income approach?
Correct Answer
C) The market rate of 5% as the starting point, with consideration of why the subject's rate differs and whether that difference is likely to continue
Under USPAP and California appraisal practice, the appraiser should use the market vacancy rate as the starting point but consider property-specific factors. If the subject's lower vacancy rate is due to sustainable factors (excellent management, superior location, below-market rents, or unique amenities), the appraiser may justify using a rate between the property's actual rate and the market rate. The analysis should explain why the subject's performance differs from the market.
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Previous Question
A California appraiser needs to extract a GRM from a comparable sale. A fourplex in Riverside, California recently sold for $680,000. The four units were renting at $1,250, $1,300, $1,200, and $1,250 per month at the time of sale. What is the monthly Gross Rent Multiplier?
Next Question
An appraiser in California is calculating operating expenses for a rental property. The property has recently undergone a change in ownership, triggering a Proposition 13 reassessment. The previous owner's property tax was $4,200/year based on a 1990 purchase price. After reassessment to the current sale price of $850,000, the new property tax will be approximately $10,200/year (at approximately 1.2% including local overrides). Which property tax figure should the appraiser use?