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Appraising Buildings - Economics

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Appraising BuildingsISU – Economics 364X
Tim JanssenAppraiserFarm Credit Services of America
Introductions
NameWhere you’re from(city, county)Whether or not you grew up on a farmWhat kind of operation(grain, livestock, etc.)
Objectives
Understanding the inspection processTypes of data to be collected during the inspection processAbility to describe the physical characteristics of the improvementsAbility to identify functional and external depreciation issuesIdentify factors used to estimate RCNs
Preparing for the Inspection
Know what you’re going to see before you goHave a list of questions before going outAssessor’s sheetPlans, specs, costs on newer constructionAerialSoil Map
Information to be Collected
Building DescriptionAssess Condition(Effective Age/Remaining Economic Life)Size/CapacityFunctional Depreciation IssuesExternal Depreciation Issues
Dwellings
DescriptionTypes -ranch, multi-story, log, manufactured vs. modular, contemporaryConstruction MaterialsInterior Features -bedrooms, bathrooms, kitchen built ins, basement finish, walk-out, fireplaces, floor coverings, quality, etc.HVAC System -forced hot air, geo-thermalWater Source -rural water or wellSeptic -tank and laterals or public sewer
Dwellings
Size - Square Feet of Living SpaceAbove Grade vs. Below GradeUse outside measurementsCeiling Height -must be at least 5 feetPorches/Decks -open, 3 season vs. 4 season roomBay WindowsBasement Finish -not included in square feet calculation
Dwellings
Functional Depreciation IssuesFloor Plan and DesignGarage– number of cars, attached, detached, built-in, basementBathroom on second levelSuperadequateFeatures -pool, jet tub?, basketball court, theatre room?, quality or size above neighborhood standards, etc.
Dwellings
External Depreciation IssuesLocationalIssues -next to livestock confinement buildings, gravel vs. paved road, distance to off-farm employment, etc.Contemporary DesignsSuperadequatefor area or economic conditionsEconomic Considerations -unemployment rates, interest rates, etc.
Dwellings
RCN GuidelinesVaries greatly depending on size and designBasic ranch style: $125-175 per square footMulti story dwellings typically cost less per square footLog and contemporary designs can cost significantly more on a per square foot basis
Machine Sheds and Shops
Size -square feet based on outside dimensionsHeight to EavesFeaturesConstruction -pole vs. wood frame, siding and roof materialsInterior features -concrete floor, insulation, heat, interior wall finish, floor drains, etc.Door size and type -sliding, overhead, bi-foldBrand or Builder
Machine Sheds and Shops
Functional and External IssuesEave height may limit size of machineryDimensions may limit size of machinerySuperadequacySmall acreage wouldn’t need a high end shop
Machine Sheds and Shops
RCN Guidelines - Machine Sheds4000 SF or less: $8.00-11.00/sf.4000 SF or more: $7.00-9.00/sf.Height to eave: 14’-18’Concrete floor: $4.00-5.00/sf.Insulation: $1.50-3.00/sf.Basic electrical: $0.50-1.00/sf.Overhead doors: $2000-10,000/ea.
Machine Sheds and Shops
RCN Guidelines - Shops1600 SF or less: $25.00-35.00/sf.1600-10,000 SF or more: $20.00-30.00/sf.Height to eave: 16’+/-Heaters: $3.00-6.00/sf.Radiant in-floor heat: $4.00-6.00/sf.Bathroom plumbing: $4.00-10.00/sf.Low cost office: $2.00-5.00/sf.
Grain Storage - Bins
Size/CapacityNormally measured in bushelsDiameter squared X height X 0.628Formula does not include ‘peaking’FeaturesDryerAeration floor/fansStiratorUnloading augerLadder
Grain Storage - Bins
RCN Guidelines10,000 to 20,000 bushels: $2.00-2.60/bushel20,000 to 60,000 bushels: $1.50-2.25/bushel60,000+ bushels: $1.25-1.75/bushelDrying bins: +$0.20-0.80/bushel for burners, controls,stirators, stiffeners, and spreaders
Grain Storage - Handling
Grain LegBushels per hourHeightDropsDryersBushels per hour
Hogs - Finishing
Size/CapacityBuilding Size -measured in square feet or headCapacity -7.5+/- square feet of usable pen space per head (doesn’t include offices & alleys)Building Features and DesignsModern -double curtains, fully slatted, climate controlled, natural or tunnel ventilationOld Designs -open front, modified open front, “Cargill” finishers
Hogs - Finishing
Condition IssuesEconomic Life: 25 yearsFinishing vs. Wean/Finishing ContractsFinishing: $28-36/pig spaceWean/Finishing: $34-42/pig spaceTerms: 5-7 years but had been 10 yearsExternal Depreciation IssuesHog pricesAvailability of grower contracts
Hogs - Finishing
RCN GuidelinesFinishing: $205-220/pig spaceWean/Finishing: $215-230/pig spaceBrooders/Feed Mats: $5-8/pig spaceGenerators and compost facilities would add to costOffices and showering facilities can add to cost
Hogs -Farrowing
Size/CapacityNormally measured in # of sows6.0 to 6.5 Sows perfarrowingcrateGestation cratesHolding pensGilt development/isolation space
Hogs -Farrowing
Functional IssuesAdequate gestation spaceAdequate sow movement/holding spaceAdequate gilt isolation and development spaceSow flowExternal IssuesFeeder pig and market hog pricesEnvironmental regulations, permitting, interest rates, etc.
Hogs -Farrowing
RCN Guidelines$1200 to 2000 per sowFactors Affecting RCNOffice facilitiesDeveloper facilitiesGestation type - pen vs. crate
Hogs - Nursery
Size/CapacityMeasured in pig spaces3.0-4.0 square feet per headFunctional IssuesSeparate site for bio-securityExternal IssuesFeeder and market hog prices, demand for feeder pigs, availability of contracts, etc.
Hogs - Nursery
RCN Guidelines$150 to $200 per pig space$30 to $45 per square foot
Cattle – Feedlots & Confinements
Size/CapacitySquare feet per headConfinement40sf/head for solid floor25sf/head for slatted floors over pitsOpen lot225sf/headBunk space per headConfinement: 10” per headOpen lot: 12” per head
Cattle - Feedlots & Confinements
RCN GuidelinesOpen Lot: $225-275/headConfinements:Solid Floor: $10-15/sf. or $500-700/headSlatted Floors & Pit: $21+/sf. or $1000+/headOther ConsiderationsAdd $125-275 per head forfeedmill, grain storage, commodity shed, processing building, etc.Capacity can be limited by permits and manure storage
Cattle - Feedlots & Confinements
Functional IssuesBunk space vs. lot spaceFeed storage, mixing, and handling systemManure storage and handling system (settling basin)Receiving/working/shipping facilitiesExternal IssuesCattle pricesFeed pricesEnvironmental regulations
Poultry – Laying Hens
Size/CapacityStacked Cages: 53-80 sq. in./bird(67 sq. in. per bird is fairly typical)Cage FreeConstruction and DesignHi-Rise vs. StackedEgg Processing -packer, grader, breakerManure Storage and Handling
Poultry – Laying Hens
RCNsPullet Barns:$10-12/birdLayer Barns:$15-20/bird for standard cage designPacking, breaking, and grading facilities can add significantly to the cost
Poultry – Laying Hens
Functional Depreciation IssuesProcessing building and equipment ‘right sized’ for the number of layersExternal Depreciation IssuesFeed CostsEgg PricesAvailability of ContractsCustomer Preferences -cage-free vs. cages, liquid egg vs. table eggs, etc.
Poultry - Turkeys
Size/CapacityBrooder: 0-5 lbs., 0.6-0.7sf/birdFinish Light Birds: 20-25 lbs, 3.0-3.5 sf./birdFinish Heavy Birds: 30-40 lbs, 3.5+sf/birdConstruction and DesignRCNsBrooders: $13.00-18.00/sf.Finishers: $9.00-13.00/sf.
Poultry - Turkeys
Functional Depreciation IssuesBrooder space vs. finish spaceBrooders turn every 4.5-5.5 weeks vs. finishers turn every 15-19 weeksBrooding and finishing on same siteExternal Depreciation IssuesLong-term grower contract available?Location to nearest packing plantLocation relative to neighboring buildings and livestock facilities (bio-security)
Other Considerations
Some buildings don’t contribute any significant value(corn cribs, old barns, etc.)PermitsWind TurbinesUnderground Storage TanksBio-security issues relating to location of livestock facilities
Objectives Reviewed
Understanding the inspection processTypes of data to be collected during the inspection processAbility to describe the physical characteristics of the improvementsAbility to identify functional and external depreciation issuesIdentify factors used to estimate RCNs
Conclusions and Wrap Up
Questions regarding inspectionsQuestions regarding appraisal professionAppraiser Gift Bag
Contact Information
Tim.Janssen@fcsamerica.comOffice Phone: 641-792-9403THANK YOU!!!

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Appraising Buildings - Economics