Rent Comparability Studies
The author, Glenn J. Rigdon, MA, MRICS, ASA is a commercial appraiser real property / broker. He was the Economist AZ State Land Department and Staff Specialist ROW - Legal for NDOT. See http://www.horizonvillageappraisal.com/ and our sister site at http://www.nevadacommercialrealproperty.com for more information or call 1-702-568-6699.View all articles by Glenn Rigdon
RCS studies are also periodically required on HUD financed properties, usually they are needed by those projects that are renewing their Section 8 contracts for one year or multiple years. The RCS study required by HUD must strictly adhere to the requirements detailed in HUD Notice H 00-12, and an example of the detail expected in the report is laid out for appraisers in HUD's Section 8 Reneway Policy Guide Book. HUD rent comparability studies (RCS studies) can be relatively straight forward when standard unit types are analyzed, but they can become considerably more complex when the study moves to units like "Quads" that house four individuals in the same unit.
Based on the detail laid out in HUD's Section 8 Renewal Policy Guide Book, HUD wants everything from the report format to the adjustment grids standardized. After many years of receiving every appraiser's version of a rental study HUD has decided to be quite specific about their needs. My suggestions to appaisers who want to do RCS Section 8 work is that they pay attention to the layout and detail provided, you can't have the requirements any more spoon fed than it is in the HUD documents. There will be absolutely no excuse for you to submit a report that is not acceptable if you have used their guide book.
Studies of rental rates consider a number of economic, locational and physical factors including; location, appeal, size, services, condition, quality, project / building amenities and effective age. Appraisers familiar with the property type and the specific market area being studied generally know which factors have a major influence on value and those same factors influence market rental rates. For commercial properties consideration of factors like; location, construction quality, condition, accessiblity, visibility, parking and floor-area-ratio are important.
As with all appraisal assignments the scope of work is important when doing an RCS study. Research in the subject's market area is usually sufficient to establish the market rental rate of a residential apartment, like a 1 bedroom, 1 bath unit, however a city-wide or county-wide study may be required to establish a market rental rate for a specialty property. You may find that some property types will have few or no comparable rentals available for analysis. Special-use properties like churches, bowling alleys, convenience stores and fitness centers often have specialty improvements and limited markets and they are generally owner-occupied. It doesn't take a great deal of time to take a look at the available data and consider just how difficult an assignment will be before you bid on it.
For more appraisal information contact Glenn Rigdon, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.