A California appraiser is using the income approach for a rental property and must determine whether to include ADU (Accessory Dwelling Unit) rental income. The property has a legally permitted ADU that rents for $1,500/month. How should the appraiser treat this ADU income?
Correct Answer
B) Include the ADU income as part of the property's total potential gross income, supported by market data for ADU rentals in the area
Under California's ADU legislation (Government Code §65852.2), a legally permitted ADU is part of the property and its rental income should be included in the total Potential Gross Income. The appraiser should verify the ADU rent against market data for comparable ADU rentals in the area and include it in the income stream analysis.
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Previous 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?
Next Question
A 12-unit apartment building in California has the following annual financials: Scheduled Gross Rent $180,000; Other Income $9,000; Vacancy and Collection Loss 5%; Operating Expenses (taxes, insurance, maintenance) $42,000; Management Fee 7% of EGI; Replacement Reserves $6,000. Using a 6.5% cap rate, what is the indicated property value?