The appraisal of recreational properties usually represent parcels of real estate which have natural attributes that speak to a specific benefit or restriction from alternative use. Golf courses, cottages, mariners as well as waterfront properties, conservation land, ski resorts and lifestyle products are among the most common.
The method of appraisal depends on the nature of the real estate, although one or more methods may be applied depending upon the property type and the nature of the real estate.
The three most common methods used are:
Direct Comparison Approach – A look at similar properties listed and/or sold, where the value can be converted into a unit price equivalent, taking into account any differences that may affect the value. The appraiser will describe and classify the property and select appropriate properties for comparison, when reconciling results.
Income Approach – A look at future income potential of a property with different approaches available.
- Gross Income Multiplier- A rough measure of the value of an investment property, obtained by dividing the property’s sale price by its effective gross income.
- Overall Capitalization – The ratio between the net operating income produced by an asset and its expected rate of return.
- Discounted Cash Flow – A long term study of future rents over the going-in economic horizon of a property and its land value, using inflation and risk rate applications.
Cost Approach – A look at replacement cost taking into account any depreciation and/or obsolescence. The appraiser would estimate the value of the land, estimate the replacement cost of improvements and take into account any depreciation. When property is highly unique and no data can be uncovered, greater reliance can sometimes be placed upon the findings of this methodology.