HomeMy WebLinkAboutSL011_Bourland Family Trust_2023 Appraisal UPDATED 6.28.24 (1)
APPRAISAL REPORT
SPENCER TO LOCUST - ROW - DME PROJECT
PROJECT NUMBER 605307500.1365.3500
BURL HUNTER BOURLAND AND CARMEN P. BOURLAND
515 SMITH STREET
DENTON, DENTON COUNTY, TEXAS
FOR
CITY OF DENTON
401 NORTH ELM STREET
DENTON, TEXAS 76201
16910 DALLAS PARKWAY, SUITE 100
DALLAS, TEXAS 75248
16910 Dallas Parkway, Suite 100 Dallas, Texas 75248
Ofc: 214.340.5880 www.PylesWhatley.com Appraisals@pyleswhatley.com
June 27, 2024
Ms. Captoria Brown
Senior Real Estate Specialist
City of Denton-Real Estate Division
401 North Elm Street
Denton, Texas 76201
Re: A real estate appraisal of an 1.622 acre tract of land for the Spencer to Locust – ROW- DME
project located at 515 Smith Street, Denton, Denton County, Texas.
Dear Ms. Brown:
At your request, we submit this appraisal report to estimate the market value of the above referenced
property. We have made an on-site inspection of the property and considered factors pertinent to and
indicative of value including the Denton area characteristics, market area data and trends, locational
amenities, highest and best use, and other elements of value.
This is an Appraisal Report, intended to comply with the reporting requirements set forth under
Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice for the preparation of
an Appraisal Report. As such, it presents summary discussions of the data, reasoning, and analyses that
were used in the appraisal process to develop the appraiser's opinion of value. Methodology and
terminology used throughout the report may be found in The Appraisal of Real Estate, Fifteenth Edition,
as published by the Appraisal Institute.
The subject property is a tract of land totaling 70,654 square feet, improved with a single-family
residence and mobile home park, located along the northern line of Smith Street and the western line of
Hill Street. Our opinions of value for the subject are effective as of July 16, 2023.
The appraisal problem, as applied to the subject, is to determine the property’s market value and the
total compensation due to the property owner for the proposed acquisition. “Market Value is the price
which the property would bring when it is offered for sale by one who desires, but is not obliged to sell,
and is bought by one who is under no necessity of buying it, taking into consideration all of the uses to
which it is reasonably adaptable and for which it either is or in all reasonable probability will become
available within the reasonable future.” City of Austin v. Cannizzo, 267 S.W. 2d 808 (Tex. 1954).
Page 2
Ms. Captoria Brown
June 27, 2024
With reference to the preceding definition, our opinions of value are as follows:
Whole Property 1,250,000$
Part To Be Acquired in Easement 30,403$
Remainder - Before the Acquisition 1,219,597$
Remainder - After the Acquisition 1,150,000$
Damages 69,597$
Total Compensation 100,000$
Any personal property, fixtures, or intangible items that are not real property - that are included in the
valuation - are identified as personal property and discussed herein.
The following report sets forth a description of the property along with a summary of the market data
considered and the conclusions derived from such data. Your attention is directed to the general
assumptions and limiting conditions on the following pages, as well as the extraordinary assumptions
and hypothetical conditions.
If you should have questions concerning any portion of this appraisal report, please contact our office.
Respectfully submitted,
PYLESWHATLEY CORPORATION
Richard McBride Kathleen Foley
State of Texas Certification # TX-1380335-G State of Texas Certification #TX-1380509-G
SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS
SPENCER TO LOCUST - ROW - DME PROJECT
Parcel Owner
Location
Whole Property Land Area 1.622 acres (or 70,654 SF)
Part To Be Acquired - Permanent Utility Easement 0.1410 acres (or 6,142 SF)
Zoning
Highest & Best Use
Reasonable Exposure Time
Effective Date of the Appraisal
Date of Appraisal Report
Whole Property 1,250,000$
Part To Be Acquired in Easement 30,403$
Remainder - Before the Acquisition 1,219,597$
Remainder - After the Acquisition 1,150,000$
Damages 69,597$
Total Compensation 100,000$
9 to 12 months
July 16, 2023
June 27, 2024
Residential Development
Burl Hunter Bourland and Carmen P.
Bourland
515 Smith Street
Denton, Texas 76205
R7, Residential
TABLE OF CONTENTS
LETTER OF TRANSMITTAL
SUMMARY OF IMPORTANT FACTS
PAGE
SCOPE OF THE ASSIGNMENT ............................................................................................... 1
DEFINITION OF MARKET VALUE ........................................................................................ 7
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS .............................................. 8
EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS .................... 11
REGIONAL MAP ....................................................................................................................... 12
MARKET AREA ........................................................................................................................ 13
LOCATION MAP ....................................................................................................................... 21
SUBJECT PROPERTY.............................................................................................................. 22
REAL ESTATE TAX ANALYSIS ............................................................................................ 27
AERIAL PHOTOGRAPH ......................................................................................................... 28
SUBJECT PHOTOGRAPHS .................................................................................................... 30
WHOLE PROPERTY SKETCH .............................................................................................. 35
FLOOD MAP .............................................................................................................................. 37
HIGHEST AND BEST USE ...................................................................................................... 38
LAND VALUATION .................................................................................................................. 40
COST APPROACH .................................................................................................................... 49
SALES COMPARISON APPROACH ..................................................................................... 50
INCOME CAPITALIZATION APPROACH .......................................................................... 62
RECONCILIATION – WHOLE PROPERTY VALUE ......................................................... 74
PART TO BE ACQUIRED ........................................................................................................ 76
REMAINDER BEFORE THE ACQUISITION ...................................................................... 79
REMAINDER AFTER THE ACQUISITION ......................................................................... 80
LAND VALUATION – REMAINDER AFTER ...................................................................... 82
COST APPROACH – REMAINDER AFTER ........................................................................ 83
SALES COMPARISON APPROACH – REMAINDER AFTER .......................................... 84
INCOME CAPITALIZATION APPROACH – REMAINDER AFTER .............................. 86
RECONCILIATION – REMAINDER AFTER ....................................................................... 91
SUMMARY OF COMPENSATION......................................................................................... 93
APPRAISER’S CERTIFICATE ............................................................................................... 94
APPRAISER QUALIFICATIONS ........................................................................................... 95
ADDENDA
PARCEL SURVEY/FIELD NOTES
TAX INFORMATION
ZONING INFORMATION
LETTER OF NOTICE
USPS RETURN RECEIPTS
SCOPE OF THE ASSIGNMENT
1
Purpose of the Appraisal
SCOPE OF THE ASSIGNMENT
The purpose of this appraisal is to estimate the market value of the subject property: the whole
property, part to be acquired, remainder property, and any damages to the remainder property.
This is an Appraisal Report, intended to comply with the reporting requirements set forth under
Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice for an
Appraisal Report. As such, it presents summary discussions of the data, reasoning, and analyses
that were used in the appraisal process to develop the appraiser's opinion of value. Supporting
documentation concerning the data, reasoning, and analyses is retained in the appraiser's file.
The depth of discussion contained in this report is specific to the needs of the client and intended
user(s) for the intended use stated below. The appraisers are not responsible for unauthorized
use of this report.
Client, Intended Use, and Intended User
The City of Denton is the client of Pyles Whatley Corporation. The intended use of this
appraisal is to assist the client in their determination of total compensation due to the property
owner - the market value of the property to be acquired and any remainder damages. The
intended users are the City of Denton, its officers, employees, and agents. Any other user or uses
are not intended or authorized. Use of this appraisal for any other use or by another user may
invalidate the findings and conclusions.
The client has been notified that the appraiser has not appraised the subject property in the three
years preceding the date of this report.
Effective Date of the Appraisal
The subject property is appraised as of July 16, 2023, the effective date, and is subject to the market
influences and economic conditions, which existed on that date. The subject property was inspected
on July 16, 2023.
Date of the Report: June 27, 2024
Interest(s) Valued: Fee Simple Estate and Easement Estate
A Fee Simple Estate is definable as absolute ownership, unencumbered by another interest or
estate, and subject only to the limitations of eminent domain, escheat, police power, or taxation.
An Easement Estate is defined as an interest in real property that conveys use, but not ownership,
of a portion of an owner's property.
SCOPE OF THE ASSIGNMENT
2
Identification of Property
The subject is located at the northwest corner of Smith Street and Hill Street, in the city of Denton,
in Denton County. The subject is physically addressed as 515 Smith Street, Denton, Texas 76205.
The subject is improved with a single-family residence and mobile home park. According to the
information provided, the subject tract comprises 70,654 square feet (1.6220 acres). Abutting uses
are single family residential development along the north side, industrial uses across Hill Street
along the east side, industrial uses and a mini-storage facility across Smith Street along the south
side, and a one-story, multi-tenant office building along the west side.
The subject is currently used as a single-family residence and mobile home park. The property
appraised is identified as the subject property, as improved.
Legal Description
The subject is legally described as the First and Second Tract being all that certain lot, tract or
parcel of land situated in the City and County of Denton, State of Texas, out of the Alexander Hill
640 acre survey.
Subject History
According to public records, ownership is vested in Burl Hunter Bourland and Carmen P.
Bourland. The property transferred to Burl Hunter Bourland and Carmen P. Bourland from Mary
Frances Gaston Cannon and Claud Cannon on July 31, 1978, as recorded in Volume 904, Page 912,
Deed Records of Denton County, Texas. The price and terms of the transaction are unknown. No
transactions have occurred in the last five years. To our knowledge, the property is not for sale or
under a purchase contract. Numerous tenants currently occupy the property; the subject leases were
not available for analysis or consideration.
This information is included only to satisfy the requirements of USPAP. It is not intended as a
guarantee of title or chain of title. Any interested party should obtain a title search performed by a
qualified title expert as needed.
Inspection Information
We contacted the subject property owner by certified mail. A copy of the letter and return receipt
are included in the addenda of this report. The property owner received the certified letter but did
not contact the appraiser. The property owner, or representative, was not present at the time of the
inspection on July 16, 2023.
SCOPE OF THE ASSIGNMENT
3
Project Description
The Spencer to Locust - ROW - EME Project by the City of Denton is for the overhead electrical
transmission lines utilized by the Denton Municipal Electric company. The purpose is to provide
additional capacity to the existing infrastructure. Permanent easements are required. The
construction date has not been determined.
Part To Be Acquired
The City of Denton proposes to acquire a permanent easement of the subject property for the
Spencer to Locust - ROW - EME Project. The proposed acquisition is comprised of a permanent
utility easement. Per the enclosed parcel surveys and field notes, the part to be acquired in
permanent easement totals 6,142 square feet (0.1410 acres).
Appraisal Problem
The appraisal problem, as applied to the subject, is to determine the market value of the fee
simple interest in the subject property and determine the total compensation due to the property
owner for the proposed acquisition. In addressing this problem, the principles of utility,
substitution, and anticipation are considered in the following valuation.
Data Researched
For this report, the subject market was researched for all pertinent data relating to the appraisal
problem including the following: collecting and confirming data through brokers, appraisers,
property owners, lessees/lessors, and others familiar with the real estate market. The information
provided by these sources is deemed reliable but is not guaranteed.
In addition, verifiable third-party sources were utilized including CoStar, the Multiple Listing
Service (MLS) and others. Where applicable, additional market data was extracted from market
reports and data circulated and purchased from Real Estate Research Corporation, Price
Waterhouse Coopers Korpacz Investor Survey, Yieldstar and others. The information provided
by these sources is deemed reliable but is not guaranteed.
Competency
The appraisers involved in this assignment have experience in appraising this property type and
have adequate knowledge of the property type and location to meet the competency requirements
of the Uniform Standards of Professional Appraisal Practice. In addition, other appraisers in the
market would perform similar actions in the appraisal process to fulfill the scope of work in this
assignment and the appraisal meets or exceeds the expectations of parties who are regularly
intended users for similar assignments.
SCOPE OF THE ASSIGNMENT
4
Procedure
The proposed acquisition will extend over the four existing mobile homes located along the
southern property line. It is assumed these four mobile homes will have to be removed as there
appears to be no available space on the property to relocate them. The proposed permanent utility
easement will traverse the subject property from east to west along the north side of the existing
utility easement.
For this appraisal, the subject property was inspected, and the highest and best use analyzed
considering the factors of physically possible, legally permissible, financially feasible, and
maximally productive. The sales comparison and income capitalization approaches are
applicable for appraisal purposes and are included in the valuation of the subject. Due to the age
of the buildings, the cost approach is not considered relevant and is not included in the analysis.
The market was researched for all pertinent land sale data and improved sales and rentals relating
to the valuation. These data are analyzed and adjusted using commonly accepted appraisal
techniques. The subject land is valued by market comparison of similar tracts of land using the
sales comparison approach. The resulting value indications are reconciled to one final opinion of
value of the whole property.
Exposure Time
Exposure time is defined as the estimated length of time the property interest being appraised
would have been offered on the market prior to the hypothetical consummation of a sale at
market value on the effective date of the appraisal; a retrospective opinion based on an analysis
of past events assuming a competitive and open market.
Considering the state of the economy, properties of the subject type, and market participants’
actions, an exposure time of 9 to 12 months is concluded for the subject property – at a value
consistent with the conclusions of this report.
Project Influence
The subject property is appraised excluding consideration of the effect, if any, on value of the
whole property and the part to be acquired caused by the proposed public improvements and
excluding any non-compensable damages to the remainder property that result because of the
part acquired or the public project. We conclude that the impending project has no effect on the
whole property or on the comparable market data used herein.
SCOPE OF THE ASSIGNMENT
5
JURISDICTIONAL EXCEPTION
The Uniform Standards of Professional Appraisal Practice (USPAP) requires that “When
analyzing anticipated public or private improvements, located on or off the site, an appraiser
must analyze the effect on value, if any, of such anticipated improvements to the extent they are
reflected in market actions.” USPAP, Standards Rule 1-4 (f)
USPAP provides that in developing a real property appraisal, an appraiser must: “determine the
scope of work necessary to produce credible assignment results in accordance with the SCOPE
OF WORK RULE.” USPAP, Standards Rule 1-2 (h)
The USPAP Comment section of the SCOPE OF WORK RULE states in part:
“Comment: The scope of work is acceptable when it meets or exceeds:
• the expectations of parties who are regularly intended users for similar
assignments; and
• what the appraiser’s peers’ actions would be in performing the same or a
similar assignment.”
It is generally an accepted public policy that the appraisal of rights-of-way excludes the effect on
value, if any, that a proposed public improvement may have on the whole property and the part
to be acquired. The appraisal of the remainder property must include the effects of the part
acquired and the public project, except elements that are considered non-compensable are
excluded from the remainder analysis. In keeping with this policy, a Jurisdictional Exception is
invoked – the subject property is appraised excluding the consideration of any effect on value of
the whole property and the part to be acquired caused by the proposed public improvements and
excludes any non-compensable damages to the remainder property that may result because of the
part acquired or the public project. The impending project has no effect on the whole property or
on the comparable sales used herein. City of Fort Worth v. Corbin. 504 S.W. 2d 828 (Tex. 1974)
and Fuller v. State, 461 S.W. 2d 595, 598 (Tex. 1970)
SCOPE OF THE ASSIGNMENT
6
Scope of Work
Pyles Whatley Corporation, through its licensed appraisers has performed all aspects of the real
estate appraisal report, to include the following:
- Identified the property and interests to be appraised;
- Communicated with the City of Denton personnel, and as appropriate, other service
providers, and landowners, regarding the appraisal assignment;
- When possible, communicated with the property owner regarding the history and the
condition of the subject property;
- Researched public records regarding the history and the condition of the subject property;
- Researched the public records for data on the subject property, including zoning,
assessments, taxes, acreage, buildings and site improvements, and maps;
- Performed a preliminary search of all available resources to determine market trends,
influences and other significant factors pertinent to the subject properties. Inspected the
subject property and subject area, and photographed the subject and relevant comparable
sales and income properties; although due diligence has been exercised in inspection of
the properties, the appraiser is not an expert in such matters as soils, structural
engineering, hazardous waste, environmental conditions, the ADA, and other similar
matters, and no warranty is given as to these elements;
- Performed an analysis of the highest and best use of the subject property;
- Researched and collected relevant data (improved sales, land sales, listings, and income
and other market data) as present in the market area (from public and private sources) and
of sufficient quality to express an opinion of value as defined in the appraisal reports;
- Gathered and analyzed the market data to reach an estimate of market value for the
appropriate interest in the subject, using the methodology and valuation approaches that
are relevant to the assignment;
- Assembled and wrote the narrative report, complete with maps, photos, and supporting
addenda;
- Prepared and submitted a written appraisal report of the subject property, as requested by
the client;
- A narrative appraisal report meets the client’s requirements.
DEFINITION OF MARKET VALUE
7
The definition of market value is:
Definition of Market Value
“Market Value is the price which the property would bring when it is offered for sale by one who
desires, but is not obliged to sell, and is bought by one who is under no necessity of buying it,
taking into consideration all of the uses to which it is reasonably adaptable and for which it either
is or in all reasonable probability will become available within the reasonable future.” City of
Austin v. Cannizzo, 267 S.W. 2d 808 (Tex. 1954).
In this report, a market value opinion of the fee simple interest in the real property is developed.
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
8
The Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute require the appraiser to "set
forth all assumptions and limiting conditions that affect the analyses, opinions, and conclusions
in the report”. In compliance therewith, and to assist the reader in interpreting this report, such
general assumptions and limiting conditions are set forth below. Specific assumptions, if any,
are referred to in the transmittal letter and their location in the report detailed.
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
Title is assumed to be marketable and free and clear of all liens and encumbrances, easements,
and restrictions except those specifically discussed in the report. The property is appraised
assuming it to be under responsible ownership and competent management and available for its
highest and best use.
No opinion is intended to be expressed for legal matters or that would require specialized
investigation or knowledge beyond that ordinarily employed by real estate appraisers,
notwithstanding the fact that such matters may be discussed in the report.
No opinion is expressed on the value of subsurface oil, gas, water, or mineral rights or whether
the property is subject to surface entry for the exploration or removal of such except as expressly
stated.
The date of value to which the opinions expressed in this report apply is set forth in the letter of
transmittal. The appraiser assumes no responsibility for economic or physical factors occurring
at some later date, which may affect the opinions herein stated.
The valuation is reported in dollars of U.S. currency prevailing on the date of the appraisal.
Maps, plats, and exhibits included herein are for illustration only as an aid in visualizing matters
discussed within the report. They should not be considered as surveys or relied upon for any
other purpose unless specifically identified as such.
All information and comments pertaining to this, and other properties included in the report
represent the personal opinion of the appraiser, formed after examination and study of the subject
and other properties. While it is believed the information, estimates and analyses are correct, the
appraiser does not guarantee them and assumes no liability for errors in fact, analysis or
judgment.
Neither all nor any part of the contents of this report (especially any conclusions as to value, the
identity of the appraiser or the firm with which they are connected, or any reference to the
Appraisal Institute or to the MAI or SRA designation) shall be disseminated to the public
through advertising media, public relations media, sales media, or any other public means of
communication without written consent and approval of the undersigned.
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
9
The appraiser is not required to give testimony or to appear in court by reason of this appraisal,
unless prior arrangements have been made.
The distribution of the total valuation in this report between land and improvements applies only
under the existing or proposed/completed program of utilization. The separate valuations for
land and buildings must not be used in conjunction with any other appraisal and are invalid if so
used.
Certain information concerning market and operating data were obtained from others. This
information is verified and checked, where possible, and is used in this appraisal only if it is
believed to be accurate and correct. However, such information is not guaranteed.
Opinions of value contained herein are opinions only. There is no guarantee, written or implied,
that the subject property will sell for such amounts. Prospective values are based on market
conditions as of the effective date of the appraisal. The appraiser is not responsible if
unforeseeable events alter market conditions subsequent to the effective date of the appraisal. As
a personal opinion, valuation may vary between appraisers based on the same facts.
No responsibility for hidden defects or conformity to specific governmental requirements, such
as fire, building and safety, earthquake, or occupancy codes can be assumed without provision of
specific professional or governmental inspections. While the general conditions of the property
were observed, no guarantee can be made concerning the individual components of the structures
including but not limited to the heating system, plumbing, electrical services, roof, possible
termite damage or building foundation, wells or septic systems. This appraiser is not qualified to
make a complete physical inspection of the property. Such an inspection is beyond the scope of
this report and no statements can be made concerning the adequacy or condition of these or other
systems.
No investigation - unless presented in other sections of this report - was made by the appraiser to
determine if asbestos, fiberglass, or synthetic mineral fiber products are present in improved
properties. The existence of such products, if any, would have to be determined by a qualified
inspector. It is assumed that there is no asbestos, fiberglass, synthetic mineral fiber products, nor
other contaminates present that would materially affect value.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not
made a specific compliance survey and analysis of this property to determine whether or not it is
in conformity with the various detailed requirements of the ADA. It is possible that a
compliance survey of the property together with a detailed analysis of the requirements of the
ADA could reveal that the property is not in compliance with one or more of the requirements of
the act. If so, this fact could have a negative effect upon the value of the property. Since we
have no direct evidence relating to this issue, we did not consider possible noncompliance with
the requirements of ADA in estimating the value of the property.
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
10
No investigation - unless presented in other sections of this report - was made by the appraiser to
determine if any toxic materials are present on the subject tract. The existence of such materials,
if any, would have to be determined by a qualified inspector. It is assumed that no toxic
materials are present that would materially affect value or development costs.
A reasonable investigation was made to determine the existence of any underground storage
tanks (UST) on the subject site. If USTs are present on the subject site details are provided in
other sections of this report. It is assumed there are no USTs present that would materially affect
value.
Any personal property, fixtures, or intangible items that are not real property, that are included in
the valuation- are identified as personal property and discussed herein.
Due to the multiplicity of mathematical calculations used in standard appraisal practice, rounded
values, e.g., rounded to whole dollars or whole units of measure such as linear feet or square feet,
may result in inexact sums of components. The typical difference in such cases does not
materially affect the value conclusions of this appraisal report or the total compensation due to
the property owner.
EXTRAORDINARY ASSUMPTIONS/HYPOTHETICAL CONDITIONS
11
Extraordinary Assumptions/Hypothetical Conditions: The Uniform Standards of Professional
Appraisal Practice require the disclosure of hypothetical conditions and extraordinary
assumptions when employed in the development of an appraisal.
As defined in the Uniform Standards of Professional Appraisal Practice, an extraordinary
assumption is “an assignment-specific assumption as of the effective date regarding uncertain
information used in an analysis which, if found to be false, could alter the appraiser’s opinions or
conclusions.”
As defined in the Uniform Standards of Professional Appraisal Practice, a hypothetical condition
is “a condition, directly related to a specific assignment, which is contrary to what is known by
the appraiser to exist on the effective date of the assignment results but is used for the purpose of
analysis.” The use of these assumptions and/or conditions may have affected the assignment
results.
EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS
The subject is appraised conditioned upon the following extraordinary assumptions:
The subject site is located at the northwest corner of Smith Street and Hill Street.
Adequate, legal access to the subject is assumed available as of the appraisal date.
It is assumed that access will be continually available to the subject during
construction of the project. Smith Street is currently being resurfaced by the City
of Denton. This report considers Smith Street and Hill Street to be paved and
accessible.
According to the City of Denton project engineer, two of the manufactured homes
partially located in the proposed permanent easement will be allowed to remain on
the subject, will continue to have a certificate of occupancy, and will not be
adversely impacted as a result of the project.
A complete survey of the subject is available. A title commitment/history covering
the subject was not provided. Typical easements for utilities, drainage, and access
are assumed, but none that would be detrimental to the property.
Due to a jurisdictional exception, the subject is appraised with the hypothetical condition that, in
the remainder condition, the project is complete and in place.
The above are set forth for appraisal purposes and no legal reasoning is intended. The reader
should be aware that in the event any of the above proves false or improperly applied, the
conclusions of this appraisal could be changed or invalidated.
REGIONAL MAP
12
REGIONAL MAP
MARKET AREA
13
A market area, as defined in The Dictionary of Real Estate Appraisal, 7th Edition, copyrighted
2022, is:
MARKET AREA
"The geographic region from which a majority of demand comes and in which the majority of
competition is located.”
When analyzing value influences, the focus is on market area. A market area is defined in terms
of the market for a specific category of real estate and thus, is the area in which alternative,
similar properties effectively compete with the subject property in the minds of probable,
potential purchasers, and users. A market area can encompass one or multiple neighborhoods or
districts.
MARKET AREA INFLUENCES
The subject property is located in the city of Denton, Texas, situated in the Dallas-Fort Worth
metropolitan area. Area analysis and subject vicinity are presented in the following pages.
Metropolitan Statistical Area (MSA) and Metropolitan Division (MD)
With a population of over 7.9 million in 2023, Dallas/Fort Worth and the surrounding area is the
fourth largest MSA under this classification. The DFW MSA is comprised of two Metropolitan
Divisions: Dallas-Plano-Irving (or Dallas MD) on the east and Fort Worth-Arlington (or Fort
Worth MD) on the west. The Dallas MD includes Collin, Dallas, Denton, Ellis, Hunt, Kaufman,
and Rockwall Counties with a 2023 population of over 5.3 million. The Fort Worth MD is
comprised of Johnson, Parker, Tarrant, and Wise Counties with a 2023 population of over 2.6
million. The DFW MSA has grown 19.5% since 2010, with Collin, Denton, Kaufman, and
Rockwall experiencing the greatest growth.
= Dallas-Fort Worth Arlington MSA
Fort Worth-Arlington
Metropolitan Division
Dallas-Plano-Irving
Metropolitan Division
MARKET AREA
14
LOCATION
Denton County is located in the northern quadrant of the state of Texas, comprising the northern
portion of the Dallas/Fort Worth/Arlington Metropolitan Statistical Area. The locale is
approximately thirty miles northwest of the Dallas CBD and thirty miles northeast of the Fort
Worth CBD, with the Dallas/Fort Worth International Airport eighteen miles south. Adjoining
suburban neighborhoods are similar as to make-up and land uses. These include the suburban
cities of Lewisville and Flower Mound. Properties in the area compete with other similar market
areas.
The accessibility and location amenities of the above-delineated general area have been
significant in its development, redevelopment, and sustenance of commerce in the area. The
general area is well serviced by major freeways, benefits from high intensity commercial as well
as residential development, and is convenient to both the Dallas CBD and the Fort Worth CBD.
Traffic Routes
The traffic system is efficient and provides average access amenities to the area. Interstate
Highway-35 which travels north to south, is a six-lane freeway connecting the Denton area to the
cities of Dallas and Fort Worth. The other major freeway that services the neighborhood is US
Highway 380 (University Drive), a six-lane undivided roadway, which is the main east-west
highway through the city of Denton connecting Interstate 35, U.S. 377, and Loop 288.
The primary north-south traffic route near the subject is Loop 288, a six-lane divided roadway.
Additional north-south traffic routes include Teasley Lane and Dallas Drive. East to west traffic
routes include Shady Oaks Drive and Morse Street.
Population and Economics
Denton is a larger medium sized city with a 2022 population of 148,164 people, and 25
constituent neighborhoods. Denton is the 20th largest community in Texas. The projected
population for the city of Denton in 2023 is 160,564 and in 2029 is 204,000. Denton is currently
growing at an average rate of 4.11% annually.
The most prevalent occupations for people in the area are a mix of both white and blue collar
jobs. Overall the city is a mix of professionals, sales and office workers, and service providers.
Approximately 13.01% work in office and administrative support, 10.86% in sales jobs, and
10.57% in the teaching profession.
The aggregate U.S. unemployment rate was 3.4% in May 2023. In comparison, the Bureau of
Labor Statistics reported an unemployment rate of 4.1% for the state of Texas, 3.8% for the
Dallas/Fort Worth MSA, 3.6% for Denton County, and 3.6% for the city of Denton.
MARKET AREA
15
The outbreak of the Coronavirus (COVID-19) had reaching effects worldwide since the onset of
the pandemic beginning March 2020 in the US. While a slight setback was experienced, overall,
the United States as a whole and specifically the Texas economy has seen significant economic
recovery from the COVID-19 pandemic.
The metropolitan area boasts a long list of national and international corporate headquarters, with
many major companies relocating to DFW in the past twenty years. The availability of
reasonably priced land, lower living cost for employees, favorable climate, and reasonable
housing are great incentives.
Education
The schood district’s student population has grown by almost 28 percent since the 2007 bond
election. The current estimated student population is 30,265 with a student teacher ratio of 13:1.
The school district ranks in the top 20% of public schools in the state of Texas.
In addition to 24 elementary schools, eight middle schools, four high schools, the district has two
early childhood centers, an advance technology complex, and an alternative high school.
Higher education facilities include University of North Texas, Texas Woman’s University, and
North Central Texas College.
University of North Texas, with a current student population of 38,081, is a public research
university, with eleven colleges, two schools, and offers 38 doctoral degree programs.
Texas Woman’s University, with a current student population of 15,472, is a private co-
educational university with two health science center branches in Dallas and Houston. The
school has a Carnegie classification as a comprehensive research and doctoral university.
MARKET AREA
16
Medical
In addition to private practices, Denton County is served by numerous medical facilities which
includes The Heart Hospital Baylor Denton. The center offers comprehensive surgical and
interventional, noninvasive, diagnostic cardiac and vascular services, and cardiovascular
rehabilitation services to Denton County and the fast-growing North Texas region.
Additional facilities include Texas Health Presbyterian Hospital Denton, Medical City Denton
and Select Rehabilitation Hospital-Denton.
Rayzor Ranch Development
Rayzor Ranch is a 410-acre master planned community located in Denton, Denton County,
Texas, at the intersection of Interstate Highway 35 and State Highway 380. The development
was started in 2008 and is currently still being developed as a cohesive, pedestrian friendly area
inspired by historical Texas Architecture. The development includes large anchor tenants such
as Walmart, and Sam’s Club, as well as, other large retail, junior anchors, specialty retailers,
restaurant and financial institutions. When completed, it will be the largest super-regional retail
development between Dallas, Texas and Oklahoma City, Oklahoma.
TRANSPORTATION
Dallas/Fort Worth International Airport
The Dallas/Fort Worth International Airport, which opened January 1974 and covers more than
26.9 square miles, has had an enormous impact on the economy. There are approximately
60,000 on-airport employees and $37 billion dollars of economic activity across North Texas is
attributable to the airport.
DFW airport ranks third in the world, in terms of operations and tenth in terms of passengers.
Twenty-six passenger airlines, 165 gates, and 7 total runways serve the airport. The Terminal
Renewal and Improvement Program began in February 2011 and was completed by year-end
2021. The improvement program includes expanding security checkpoints, enhanced
concessions and self-serve ticketing areas, improved parking, and implementation of green
technology. Total cost is estimated at $2.69 billion over the course of the program.
MARKET AREA
17
AREA DEMOGRAPHICS
The following Market Profile provided by Site to Do Business provides demographic and income
data for a 1-mile, 3-mile, and 5-mile radius centered on the subject’s vicinity.
MARKET AREA
18
MARKET AREA
19
MARKET AREA
20
CONCLUSIONS
The transportation network in the area is good and surrounding land uses are considered to be
compatible and homogenous. The subject area is in a growth phase of development and in
proximity to employment centers and quality schools and services. Most developments in the
immediate area were constructed in the 1970’s to 1980’s. new developments are centered around
Rayzor Ranch, a 410-acre master planned community located at the intersection of Interstate
Highway 35 and State Highway 380. The development was started in 2008 and is currently still
being developed as a cohesive, pedestrian friendly area inspired by historical Texas Architecture.
The development includes large anchor tenants such as Walmart, and Sam’s Club, as well as,
other large retail, junior anchors, specialty retailers, restaurant, and financial institutions. When
completed, it will be the largest super-regional retail development between Dallas, Texas and
Oklahoma City, Oklahoma.
No noticeable nuisances or hazards are in the area and the majority of improvements are in the early
to middle stages of economic life, and sufficient area services are accessible to service the
community.
LOCATION MAP
21
LOCATION MAP
SUBJECT PROPERTY
22
The whole subject property is improved with a single-family residence and mobile home park,
located at the northwest corner of Smith Street and Hill Street, Denton, Denton County, Texas.
The subject is physically addressed as 515 Smith Street, Denton, Texas, 76205.
Subject property
SITE DATA
Site/Dimensions/Frontage
Based on the information available, the whole property tract is rectangular in shape, and contains
70,654 square feet or 1.6220 acres. The subject fronts the northern line of Smith Street for 336.03
linear feet, and the western line of Hill Street for 174.65 feet. The subject is approximately 189 feet
deep, along the western property line.
Subject Vicinity and Abutting Uses
The subject abuts single family residential development along the north side, industrial uses
across Hill Street to the east side, industrial uses and a mini-storage facility across Smith Street
along the south side, and a one-story, multi-tenant office building along the west side. Types of
properties located in the subject vicinity are mostly residential with some commercial and light
industrial uses along the main arterials.
Linkages
The subject is accessible to arterial linkages and the distance to employment centers, retailers,
restaurants, and schools is considered within reason in the city of Denton. In terms of travel time
and actual distances by road, the subject property is within community standards.
Access
Smith Street and Hill Street are two-lane, undivided roadways. Overall, access for the
neighborhood is rated as average. Access to and from the subject is average and via two curb
cuts along the northern line of Smith Street. Visibility and exposure of the subject are rated
average.
Topography/Flood Zone
The topography of the tract is mostly level and at street grade, and is not problematic to
development. According to FEMA flood hazard map 48121C0360G dated April 18, 2023, the
subject is determined to be outside the 100-year floodplain, being within Zone 'X'. Drainage of the
site appears graded. No representation is made that the site will or will not flood. A hydrological
study or survey is required for confirmation of flood-designated boundaries.
SUBJECT PROPERTY
23
Utilities/Community Services
Electricity, water, sewer, and telecommunication services are available to the subject. Electric
service and telecommunication services are available by various providers. Natural gas service
is available from Atmos Energy. Water and wastewater is provided by the City of Denton.
Police and fire protection are provided by the City of Denton. The property is located within the
Denton Independent School District.
Zoning
The site is zoned R7, Residential by the City of Denton. The R7, Residential district is intended
to accommodate a variety of housing types on lots designed to encourage walking to
neighborhood-serving retail and other amenities such as parks and school facilities. This zoning
district will ensure existing neighborhood character is maintained while also contributing to a
safe environment for pedestrians and bicyclists. This district can also serve to support
compatibility between single-family neighborhoods and higher-intensity mixed-use or
nonresidential.
Minimum lot area 4,000 square feet
Minimum lot width 50 feet
Minimum lot depth 80 feet
Front yard setback 10 feet
Side yard setback 5 feet
Rear yard setback 10 feet
Maximum building height 40 feet
Maximum building coverage 65%
Soils, Development Limitation, and Productivity
This report assumes the soils are capable of supporting the structures, as numerous
improvements are located within the subject area and adjoining area. A study of the
development, limitations, and productivity were not completed in this appraisal report, as it is not
necessary to the scope of the appraisal.
Easements
A complete survey of the whole site is available for analysis. This valuation assumes that utility
and access easements typical of this property type are present and that no detrimental easement
conditions exist. This should not be considered as a guaranty or warranty, however that adverse
easements do not exist. Were the property to have any easements detrimental to the subject, the
opinion of value concluded herein may be invalid.
SUBJECT PROPERTY
24
Deed Restrictions
To our knowledge, no deed restrictions affect or limit the use of the property; however, this
should not be considered as a guaranty or warranty that no such restrictions exist. Deed
restrictions are a legal matter: normally discoverable only by a title search by a title attorney. It
is recommended that a title search be made if any questions regarding deed restrictions arise.
Wetlands
No visual evidence was observed to indicate whether wetlands exist on the subject site. Wetlands,
as defined by Section 404 of the Clean Water Act, are those areas that are inundated or saturated by
surface or groundwater at a frequency and duration sufficient to support, and under normal
circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil
conditions. Swamps, bogs, fens, marshes, and estuaries are subject to federal environmental law.
Environmental Conditions
To our knowledge, a Phase I Environmental Site Assessment has not been completed for the
subject property as of the date of inspection. The subject is appraised predicated on the absence
of detrimental environmental conditions. The conclusions of this appraisal report would be
materially changed if detrimental environmental conditions affect the subject.
SUBJECT PROPERTY
25
SUBJECT IMPROVEMENTS
The land is improved with a single-family residence and mobile home park. According to the
tax card, the single family residence consist of a total of 656 square feet of gross building area.
The mobile home park consists of twenty-five pad sites.
Orientation
The single family residence is rectangular in shape and oriented toward Smith Street. The
manufactured home lots are oriented toward a circular drive through the site.
Age, Construction and Condition
According to tax records, the building was constructed in 1965. The building is an average class
structure of wood frame construction on a pier and beam foundation, with a composition shingle
roof. Quality is rated as average, and the improvements appear to be in fair to average condition.
Our opinion of the improvements' effective age is 30 years, which is less than the actual age.
According to Marshall & Swift Valuation Service, the typical economic life span for buildings of
the same construction class and design as the subject is typically 55 years. Therefore, the subject
is said to have a remaining economic life of 25 years (55 years less the effective age of 30 years).
No functional or economic obsolescence is noted. No items of deferred maintenance are
observable.
Site Improvements
Site improvements are comprised of gravel drives, mailboxes, fencing, and minimal landscaping.
The landscaping includes trees, shrubs, bushes, and grass. Overall, the improvements appear to
be adequately maintained and in fair to average condition. Quality is rated as average. No items
of deferred maintenance are observable.
Parking
Zoning code requires two parking spaces per manufacture home lot. The subject property
appears to meet parking requirements.
Occupancy and Rentals
Numerous tenants occupy the property under lease agreements. Details regarding the leases are not
available for analysis. Property income and expense data are not available.
SUBJECT PROPERTY
26
Functional Utility
Functional utility is defined as the ability of a property or building to be useful and to perform
the function for which it is intended according to current market tastes and standards. The
subject is a single-family residence and mobile home park. The improvements are functionally
adequate given the architectural style, design and layout, traffic patterns, and the size and
configuration of the improvements for this property type.
External Obsolescence
External obsolescence is considered to be the loss in value of the property resulting from an
influence of negative forces not inherent with the property. It can be caused by the exertion of
detrimental external forces upon the area or property itself. Specific examples are significant
fluctuations in the local economy, noise from nearby expressways or airports, excessive taxes,
supply and demand imbalances, special assessments or certain other governmental actions, the lack
of financial liquidity in the marketplace, or the infiltration of unharmonious groups or land uses.
This form of obsolescence is rarely, if ever, curable.
The subject regional area is currently experiencing stable rental rates and occupancy levels. Based
upon the stable market conditions within the extended area the property does not appear to suffer
from external obsolescence.
CONCLUSIONS
The subject is improved with a single-family residence and mobile home park, with adequate
frontage and access via two curb cuts along the northern line of Smith Street. Condition of the
improvements is fair to average. The property appears to be a legal conforming use.
REAL ESTATE TAX ANALYSIS
27
The Texas legislature created a system of centralized appraisal districts for each Texas county so
that all real estate within a given county is valued for tax purposes through a standard appraisal
process. Property assessments are based on market value.
Real Estate Tax Analysis
In Denton County, the Denton Central Appraisal District is responsible for ad valorem tax
appraisals of all real estate within the county. Based on the ad valorem tax appraisal, various tax
districts levy annual taxes on property located within their respective districts. Typical taxing
jurisdictions include assessments from the county, city, and school districts in which the property
is located. The total ad valorem tax burden is the sum of the assessments for the various taxing
authorities.
The subject property is located in Denton County and falls within the taxing jurisdictions
summarized in the following table. The 2023 Denton Central Appraisal District tax rates and
account information for the subject are detailed below.
City of Denton 0.560682$
Denton County 0.217543$
Denton Independent School District 1.344600$
Total 2.122825$
2023 TAX RATES (per $100)
The following table indicates the 2023 assessed value used for determination of tax liability.
Account Number Land Improvements Total
35652 211,963$ 218,037$ 430,000$
Based on the preceding assessed value and pertinent tax rates, the subject's annual tax liability is
calculated as follows:
Assessed Value Tax Rate/$100
$430,000 x $0.02122825
Indicated Tax Liability
9,128= $
The assessed value equates to $430,000, or $17,200 per manufactured home site, and is below
the concluded market value in this appraisal. This difference is typically due to the valuation
methods of the appraisal district.
Additionally, the assessed land value equates to $3.00 per square foot of land area and is below
the concluded market value in this appraisal. This difference is typically due to the valuation
methods of the appraisal district.
AERIAL PHOTOGRAPH
28
Aerial Photograph
Source: Google Maps (Imagery date: October 2021)
Red line - approximate subject property boundary – appraiser’s estimate.
Yellow line - approximate location of proposed permanent utility easement – appraiser’s estimate.
SUBJECT
AERIAL PHOTOGRAPH
29
Source: Google Maps (Imagery date: October 2021)
Red line - approximate subject property boundary – appraiser’s estimate.
SUBJECT
SUBJECT PHOTOGRAPHS
30
PHOTOGRAPHED JULY 16, 2023
Subject photographs
Looking westerly along the existing and proposed permanent utility easements
Looking northwesterly across the existing and proposed easement at two of the
units affected by the acquisition
SUBJECT PHOTOGRAPHS
31
Looking northerly at the single-family residential dwelling
Looking northeasterly across the existing and proposed easements at two of the
units affected by the acquisition
SUBJECT PHOTOGRAPHS
32
Mailboxes located in the existing utility easement
Gas meters located within the existing utility easement
SUBJECT PHOTOGRAPHS
33
Looking westerly along Smith Street with the subject to the right (Smith Street
is currently being resurfaced)
Looking easterly along Smith Street with the subject to the left
SUBJECT PHOTOGRAPHS
34
Looking southerly along Hill Street with the subject to the right
Looking northerly along Hill Street with the subject to the left
WHOLE PROPERTY SKETCH
35
Source: Denton CAD
Whole Property Sketch
ZONING MAP
36
Source: City of Denton
SUBJECT
FLOOD MAP
37
Flood map
SUBJECT
HIGHEST AND BEST USE
38
Four basic criteria are examined in estimating the Highest and Best Use of a property both as
vacant and as improved. These are:
a) Physically Possible Use - the uses to which it is physically possible to put on the
site in question.
b) Legally Permissible Use - the uses that are permitted by zoning and deed
restrictions on the site in question.
c) Financially Feasible Use - the possible and permissible uses that will produce any
net return to the owner of the site.
d) Maximally Productive Use - among the feasible uses, the use that will produce the
highest net return on the highest present worth.
The subject is a 1.6220-acre tract of land and is rectangular in shape. The size and shape of the
tract is supportive of a number of potential developments.
HIGHEST AND BEST USE
HIGHEST & BEST USE AS IF VACANT
Physically Possible Use: In arriving at an opinion of highest and best use for the subject, it is
first necessary to determine if the physical characteristics of the site - such as soil conditions,
topography, shape and frontage were favorable for development. Soil conditions vary
throughout the area and sometimes require particular engineering. The subject fronts the
northern line of Smith Street for 336.03 linear feet, and the western line of Hill Street for 174.65
feet. The subject is approximately 189 feet deep, along the western property line. According to
the enclosed flood map No. 48121C0360G, the subject is determined to be outside the 100-year
floodplain, being within Zone 'X'. The site is of sufficient size, shape, and frontage to be
economically adaptable to numerous uses. The size and shape of the site is adequate for
development.
Legally Permissible Use: The site is zoned City of Denton by the City of Denton. The R7,
Residential district is intended to accommodate a variety of housing types on lots designed to
encourage walking to neighborhood-serving retail and other amenities such as parks and school
facilities. This zoning district will ensure existing neighborhood character is maintained while
also contributing to a safe environment for pedestrians and bicyclists. This district can also serve
to support compatibility between single-family neighborhoods and higher-intensity mixed-use or
nonresidential.
Financially Feasible Use: As defined in The Dictionary of Real Estate Appraisal, Seventh Edition,
is “the capability of a physically possible and legal use of property to produce a positive return to
the land after considering risk and all costs to create and maintain the use”.
The surrounding properties and land uses are considered for compatibility in determination of
feasible use. The subject abuts single family residential development along the north side,
industrial uses across Hill Street along the east side, industrial uses and a mini-storage facility
across Smith Street along the south side, and a one-story, multi-tenant office building along the
west side. Based on the land usage pattern of the surrounding area, the layout, location and
frontage/visibility of the site, the most feasible use is considered to be for residential use.
HIGHEST AND BEST USE
39
Maximally Productive Highest & Best Use: The subject fronts the northern line of Smith Street
for 336.03 linear feet, and the western line of Hill Street for 174.65 feet. Smith Street is a two-
lane, undivided roadway. Hill Street is a two-lane, undivided roadway. For a residential
development, the location is considered average for appeal within the submarket. Access is rated
as average and exposure of the subject is rated as average. Electricity, water, sewer, and
telecommunication services are available to the subject. Based on the foregoing and land use
patterns, the highest and best use of the subject tract is for residential development, as demand
emerges in the market.
HIGHEST & BEST USE AS IMPROVED
Possible Use: The improvements were built in 1965 according to the Denton County Appraisal
District. The improvements are of average quality and in fair to average condition. Overall, the
improvements are adequately maintained and have no deferred maintenance. The intended use
of the improvements is for single-family residential and mobile home park use. The physical
characteristics and accompanying amenities support the continued use as such.
Permissible Use: The site is zoned City of Denton by the City of Denton. The R7, Residential
district is intended to accommodate a variety of housing types on lots designed to encourage
walking to neighborhood-serving retail and other amenities such as parks and school facilities.
This zoning district will ensure existing neighborhood character is maintained while also
contributing to a safe environment for pedestrians and bicyclists. This district can also serve to
support compatibility between single-family neighborhoods and higher-intensity mixed-use or
nonresidential. Single family and mobile home parks are allowed in this zoning district.
Feasible Use: The existing improvements have an effective age of approximately 30 years based
on the modified economic life concept. With proper maintenance, a property of this type
typically has a useful life of 55 years. Remaining economic life of the improvements is
estimated at 25 years, based on a useful life of 55 years and an effective age of 30 years, and no
other use of the improvements could provide a greater return in the current market.
Maximally Productive Highest & Best Use: As improved, the property is improved with a
single-family residence and mobile home park and is suitable for residential use. Therefore, the
continued use as a mobile home park with a single family residence represents the highest and
best use of the land and improvements.
LAND VALUATION
40
The sales comparison method is the best method of developing an opinion of value of the
subject. In this method, known sales of similar use land in the market area are compared to the
subject to arrive at an indication of value. In arriving at value conclusions, the tracts are
compared as to the rights conveyed, financing terms, sale conditions, market conditions,
location, and physical characteristics. This approach is used to value land that is vacant or
considered vacant for appraisal purposes.
LAND VALUATION
The market was researched for recent sales, listings, or other transactions, which would provide a
valid basis for developing an opinion of the market value of the subject by comparison. After
reviewing and analyzing the sales, the sales detailed on the following pages were extracted from
this sample and utilized for the land valuation.
LAND VALUATION
41
LAND SALES MAP
LAND VALUATION
42
Land Sale No. 1
Location E of Farm-to-Market 1830, S of Country Club Road
Denton County, Texas
Legal Description
Grantor Brad Book and Karin Book
Grantee Randall G. Frakes and Ann Walker Frakes
Date of Sale June 2, 2023
Record Data
Document No.2023-65975
Consideration $402,000
Conditions of Sale Cash (or cash equivalent) to the seller
Land Area
Acres 1.58
Square Feet 68,816
Price Per SF $5.84
Zoning None
Comments The property is located along the south side of a private gated road
approximately 250 feet east of Farm-to-Market 1830,and approximately
one-half mile south of Country Club Road.The tract has approximately
250 feet of frontage along the southern line of the private road.
Surrounding uses are single-family residential on larger lots.
Lot 1,Block A,4B Ranch,an addition to Denton County,Texas,according
to the map or plat thereof,recorded in Document 2022-365,Plat Records,
Denton County, Texas
LAND VALUATION
43
Land Sale No. 2
Location Adjacent to the southwest corner of McCormick Street and IH35E frontage
road
Denton, Denton County, Texas
Legal Description
Grantor Rebecca Jean Ginnings
Grantee Knights Court, LLC
Date of Sale May 10, 2023
Record Data
Document No.2023-48221
Consideration $900,000
Conditions of Sale Cash (or cash equivalent) to the seller
Land Area
Acres 3.06
Square Feet 133,280
Price Per SF $6.75
Zoning MN, Mixed-Use Neighborhood
Comments The sale consist of three adjoining tracts of land wrapping the southwest
corner of McCormick Street and Interstate Highway 35E frontage road.The
tract has approximately 175 feet of frontage along the western line of
McCormick Street,approximately 150 feet of frontage along the eastern
line of Knight Street,and approximately 100 feet of frontage along the
southern line of Greenlee Street.
Being all that certain tract or parcel of land situated in the Eugene Puchalski
Survey,Abstract No.996,Denton County,Texas,being a tract of land
described in deed to J.L.Ginnings,recorded in Volume 462,Page 264,
Deed Records, Denton County, Texas (D.R.D.C.T.)
LAND VALUATION
44
Land Sale No. 3
Location E/s of Mockingbird Lane, S of Audra Lane
Denton, Denton County, Texas
Legal Description
Grantor HK Golden Legacy, LLC
Grantee Ikechukwu Abana
Date of Sale June 8, 2022
Record Data
Document No.2022-86179
Consideration $350,000
Conditions of Sale Cash to the seller
Land Area
Acres 2.608
Square Feet 113,609
Price Per SF $3.08
Zoning R2, Residential
Comments Th sale consists of two adjoining tracts of land located along the eastern
line of Mockingbird Lane,approximately 140 south of Audra Lane.The
tract has approximately 85 feet of frontage along the eastern line of
Mockingbird Lane.
Being all that certain tract of land situated in the M.E.P.&P.R.R.Company
Survey,Abstract Number 927,and all of a called 2.232 acre tract of land
described in the deed from R.L.Davis to Carl E.Allen and wife,Oleta B.
Allen,as recorded in Volume 1002,Page 573,Deed Records and the
remainder of a tract of land recorded in Document Number 2005-45131,
Real Property Records of said county,and described in Volume 1092,Page
287, of said deed records
LAND VALUATION
45
SF AC
1 E of Farm-to-Market 1830, S of Country Club Road 68,816 1.58 $5.84 Jun-23
2 Adjacent to the southwest corner of McCormick Street and IH35E frontage road133,280 3.06 $6.75 May-23
3 E/s of Mockingbird Lane, S of Audra Lane 113,609 2.61 $3.08 Jun-22
Subject 515 Smith Street 70,654 1.62
LAND SALES SUMMARY
Sale No. Location
Size
Price/SF
Date of
Sale
Comparable Adjustments
Adjustments to the comparable sales are considered in the categories of financing terms,
conditions of sale, market conditions/time, location, size, zoning, and availability of utilities and
other factors. Adjustments for each factor are typically made after a comparison indicates the
appropriate direction and size of each adjustment. Adjustments are based on experience and
extrapolations of market indicators.
EXPLANATION OF ADJUSTMENTS
Property Interest Transferred
Adjustments are not necessary.
Financing Terms
Adjustments are not necessary.
Sale Conditions
Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller.
Any sales that reflect unusual sale conditions are adjusted accordingly and the circumstances of
these non-arm’s length transactions are detailed on the sale summary pages. No adjustments are
warranted as each of the sales transpired with no reported uncommon sale conditions.
Market Conditions
The sales occurred between June 2022 and June 2023. Adjustments for market conditions are
applied if property values have increased or decreased since the transaction dates. Based on our
observations and analysis, real estate has appreciated approximately 4% annually. Each sale is
adjusted accordingly for time.
Location
An adjustment for location within a market area may be required when the locational
characteristics of a comparable property are different from those of the property. Most
comparable properties in the same market area have similar locational characteristics, but
variations may exist within that area of analysis. Sales 1, 2, and 3 are similarly located as the
subject, requiring no adjustment.
LAND VALUATION
46
Access
Access is defined as the points, or number of points available for ingress/egress to the subject
site, or ease of access to a site from major routes in the area. Sale properties are adjusted based
on their inferiority/superiority as compared with the subject. The subject is accessible via two
curb cuts along the northern line of Smith Street. Sales 1 and 3 have similar access available,
requiring no adjustments. Sale 2 has access from three roadways, superior as compared to the
subject, and is adjusted downward 5%.
Frontage
Frontage is the number of feet of frontage along the subject roadway or roadways. Sale
properties are adjusted based on their inferiority/superiority as compared with the property. The
property has frontage along Smith Street and sides to Hill Street. Sale 1 has similar frontage as
the subject and is not adjusted. Sale 2 is superior in frontage as compared to the subject and is
adjusted downward 5%. Sale 3 is inferior in frontage as compared to the subject and is adjusted
upward 5%.
Exposure
Exposure is the visibility of the subject to the roadways or neighboring properties. Exposure is
not a determining factor for residential development; therefore, no adjustments are considered.
Size
The subject is 1.622 acres. The size adjustment is based on the premise that, in general, the
larger the tract, the less its selling price on a per unit basis. Recent experience with other
properties indicates an approximate 5% - 15% adjustment for each doubling/halving (100%) in
size. A 5% adjustment for each doubling/halving (100%) in size is utilized. Each sale is
adjusted accordingly for size.
Zoning
The property is zoned by the City of Denton. The R7, Residential district is intended to
accommodate a variety of housing types on lots designed to encourage walking to neighborhood-
serving retail and other amenities such as parks and school facilities. This zoning district will
ensure existing neighborhood character is maintained while also contributing to a safe
environment for pedestrians and bicyclists. This district can also serve to support compatibility
between single-family neighborhoods and higher-intensity mixed-use or nonresidential. The
sales are similar to the subject and do not require adjustments.
LAND VALUATION
47
Utilities
Electricity, water, sewer, and telecommunication services are available to the subject. Each of
the sales has water, sewer, electricity, and telecommunication service available to the respective
sites and is not adjusted.
Topography
The terrain is characterized as mostly level and drainage is considered adequate. According to
FEMA flood hazard map 48121C0360G, the subject is determined to be outside the 100-year
floodplain, being within Zone 'X'. All three sales are similar in topography to the subject and
adjustments are not made.
ADJUSTMENTS
The grid below outlines the pertinent characteristics of each of the comparable sales and the
adjustments applied.
Sale No.1 2 3
No. of Acres 1.580 3.060 2.608
Size - SF 68,816 133,280 113,609
Sale Date Jun-23 May-23 Jun-22
Sale Price $402,000 $900,000 $350,000
Sale Price Per SF $5.84 $6.75 $3.08
Rights Conveyed 0%0%0%
Financing 0%0%0%
Sale Conditions 0%0%0%
Market Conditions 0%1%4%
Adjusted Price $5.84 $6.82 $3.20
Location 0%0%0%
Access 0%-5%0%
Frontage 0%-5%5%
Exposure 0%0%0%
Size 0%5%4%
Zoning 0%0%0%
Utilities 0%0%0%
Topography 0%0%0%
Net Adjustment 0%-5%9%
Adjusted Price/SF $5.84 $6.48 $3.49
LAND SALES ADJUSTMENTS
LAND VALUATION
48
Land Value Opinion
After the adjustment process, the comparable sales range from $3.49 to $6.48 per square foot
with an adjusted mean of $5.27 per square foot and an adjusted median of $5.84 per square foot.
Based on the foregoing and giving emphasis to the adjusted mean and median, it is our opinion
that the market data support an estimated fee simple value of $5.50 per square foot for the
subject land, with an indicated value opinion of the subject land of $388,597.
No. of Square Feet $/SF Indicated Value
70,654 x $5.50 $388,597
Total Land Area
COST APPROACH
49
The purpose of the cost approach is to develop an opinion of the cost to construct a reproduction of,
or replacement for, the existing structure and then deduct all accrued depreciation in the property
being appraised from the cost new of the reproduction or replacement structure. When the value of
the land and an entrepreneurial profit, if appropriate, are added to this figure, the result is an
indication of the value of the fee simple interest in the property.
COST APPROACH
When applicable, the cost approach reflects market thinking by recognizing that market
participants relate value to cost. Investors tend to judge the value of an existing structure by
considering the prices and rents of similar buildings and the cost to create a new building with
optimal physical and functional utility. Investors adjust the prices they are willing to pay by
estimating the costs to bring an existing structure up to the level of physical and functional utility
they desire.
COST APPROACH AS APPLICABLE TO THIS ASSIGNMENT
The subject, having an effective age of 30 years, suffers from a degree of physical depreciation.
In our experience, buildings of this age will have been rehabilitated from time to time, but not
necessarily in a comprehensive manner. The subject appears to be in fair to average condition
having been adequately maintained which is the basis for the reduced effective age. Different
areas of the improvement spaces typically exhibit different degrees of condition and quality.
The cost approach would likely be the least reliable approach to value due to the speculative cost
and depreciation estimates on the existing improvements. Moreover, the cost approach to value
of real estate with existing improvements of the subject's age is not typically a reliable indicator
of market value when considering the use, and the degree of perceived depreciation applied to
the structure. The subjective nature of concluding depreciation to the structure in this instance
outweighs the construction elements of the cost approach with regard to an overall valuation.
Thus, the cost approach is not used in this assignment.
SALES COMPARISON APPROACH
50
The sales comparison approach is a method of estimating market value whereby a property is
compared with similar properties that have sold recently. One premise of the sales comparison
approach is that the market will determine a price for the property being appraised in the same
manner that it determines the price of comparable, competitive properties. The principle of
substitution is basic in this approach as it implies that a prudent person will not pay more for a
property than an acceptable alternative available in the market.
SALES COMPARISON APPROACH
The steps of the sales comparison approach are outlined as follows:
(a) Research the market to obtain information about sales, listings, and offerings of
properties similar to the subject property.
(b) Ascertain the nature of the conditions of sale, including the price, terms, motivating
forces, and its bona fide nature.
(c) Determine relevant units of comparison, price per unit or sales price per square foot and
develop a comparative analysis for each unit.
(d) Compare each of the comparable properties' important attributes to the corresponding
ones of the property being appraised, under the general categories of time, location,
physical characteristics, and conditions of sale.
Consider all dissimilarities and their probable effect on the price of each sale property to
derive individual market indications for the property being appraised.
(e) Formulate, in light of the comparison thus made, an opinion of the relative value of the
subject property as a whole, or where appropriate, by applicable units, compared with
each of the similar properties.
In the sales comparison approach, the property appraised is compared with known prices paid for
similar properties in the open market. Typically, for most properties, the most common units of
comparison used are the overall price paid per unit, and sales price per square foot.
The following summary information on improved sales judged to be comparable to the property
appraised is included herein, establishing the probable value of the subject property by the sales
comparison approach.
SALES COMPARISON APPROACH
51
IMPROVED SALES MAP
SALES COMPARISON APPROACH
52
Improved Sale No. 1
Location 2201 South State Highway 5
McKinney, Collin County, Texas
Grantor High Point MHP, LLC
Grantee CH Realty TX-FS MHC McKinney High Point, LP
Record Data
Date October 4, 2021
Document No.20211007002054060
Consideration $11,500,000
Sale Price/Unit $66,092.00
Conditions of Sale Cash (or cash equivalent) to the seller
Physical Description
Land Area
21.72 AC
946,254 SF
Gross Quantity 174 Units
Year Built 1970
Occupancy @ Sale 98%
Description Mobile Home Park
Condition Average
Comments
Acres
Square Feet
This property is located along the eastern line of South State
Highway 5,just north of Plateau Drive.The property is a
mobile home park with 174 units.The mobile home park is
in overall average condition with no additional amenities.
SALES COMPARISON APPROACH
53
Improved Sale No. 1 (Continued)
Total $/Unit
Gross Rental Income 1,566,000$ 9,000$
Less:Expense Reimbursement 208,800$ 1,200$
Less:Vacancy @ 5%88,740$ 520$
Effective Gross Income 1,686,060$ 9,690$
Total Expenses 400,000$ 2,000$
Net Operating Income 1,286,060$ 7,690$
Source: Appraiser's estimate & broker's data
11.18%
$66,092
76.28%
Pro-Forma Operating Statement - Sale No. 1
Income Data
Units of Comparison
Overall Rate (Ro)
Sales Price/Unit
NOI/EGI Ratio
SALES COMPARISON APPROACH
54
Improved Sale No. 2
Location 2025 Carl Road
Irving, Dallas County, Texas
Grantor MHTX Timberstone of Irving, LLC
Grantee Timberstone MHP, LLC
Record Data
Date March 11, 2021
Document No.202100093862
Consideration $11,280,000
Sale Price/Unit $122,609.00
Conditions of Sale Cash (or cash equivalent) to the seller
Physical Description
Land Area
7.07 AC
307,908 SF
Gross Quantity 92 Units
Year Built 1964
Occupancy @ Sale 95%
Description Mobile Home Park
Condition Average
Comments
Acres
Square Feet
This property is located along the eastern line of Carl Road,
south of East Airport Freeway.The property is a mobile
home park with 92 units and was part of a portfolio sale.All
units are two bedroom,one and one-half bath.There is only
on-site parking for approximately five units.There is a paved
parking area along the east side of the tract,all other parking
is along the curb.The property is in overall average
condition with no additional amenities.
SALES COMPARISON APPROACH
55
Improved Sale No. 2 (Continued)
Total $/Unit
Gross Rental Income 920,000$ 10,000$
Less:Expense Reimbursement 110,400$ 1,200$
Less:Vacancy @ 5%51,520$ 431$
Effective Gross Income 978,880$ 7,980$
Total Expenses 184,000$ 2,000$
Net Operating Income 794,880$ 5,980$
Source: Appraiser's estimate & broker's data
7.05%
$122,609
81.20%
Pro-Forma Operating Statement - Sale No. 2
Income Data
Units of Comparison
Overall Rate (Ro)
Sales Price/Unit
NOI/EGI Ratio
SALES COMPARISON APPROACH
56
Improved Sale No. 3
Location 7800 Mockingbird Lane
North Richland Hills, Tarrant County, Texas
Grantor BKKS Holdings, LLC
Grantee Royce La Casita, LLC
Record Data
Date March 5, 2021
Document No.D221071052
Consideration $9,231,235
Sale Price/Unit $39,962.00
Conditions of Sale Cash (or cash equivalent) to the seller
Physical Description
Land Area
31.13 AC
1,356,023 SF
Gross Quantity 231 Units
Year Built 1990
Occupancy @ Sale 94%
Description Mobile Home Park
Condition Average
Comments
Acres
Square Feet
This property is located along Mockingbird Lane,east of
Davis Boulevard.This property is a mobile home park with
231 units.The mobile home park is in average condition
with additional amenities including a swimming pool and
clubhouse.
SALES COMPARISON APPROACH
57
Improved Sale No. 3 (Continued)
Total $/Unit
Gross Rental Income 1,247,400$ 5,400$
Less:Expense Reimbursement 277,200$ 1,200$
Less:Vacancy @ 5%76,230$ 660$
Effective Gross Income 1,448,370$ 5,940$
Total Expenses 510,000$ 2,208$
Net Operating Income 938,370$ 3,732$
Source: Appraiser's estimate & broker's data
10.17%
$39,962
64.79%NOI/EGI Ratio
Pro-Forma Operating Statement - Sale No. 3
Income Data
Units of Comparison
Overall Rate (Ro)
Sales Price/Unit
SALES COMPARISON APPROACH
58
Sale No.Address YOC No. of Units Price/Unit Date
1 2201 South State Highway 5 174 Units $66,092 Oct-21
McKinney, Collin County, Texas
2 2025 Carl Road 92 Units $122,609 Mar-21
Irving, Dallas County, Texas
3 7800 Mockingbird Lane 231 Units $39,962 Mar-21
North Richland Hills, Tarrant County, Texas
Summary of Improved Sales
1970
1964
1990
The sales in the sample were selected from a larger group as being most similar in overall
physical characteristics as compared to the subject. The sale sample ranges in price from
$39,962 to $122,609 per unit, range in size from 92 units to 231 units, and were constructed
between 1964 and 1990.
Comparable Adjustments
Adjustments to the comparable sales are considered in the categories of financing terms,
conditions of sale, market conditions/time, location, size, zoning, and availability of utilities and
other factors. Adjustments for each factor are typically made after a comparison indicates the
appropriate direction and size of each adjustment. Adjustments are based on experience and
extrapolations of market indicators.
EXPLANATION OF ADJUSTMENTS
Rights Conveyed
The rights conveyed of the sales represent fee simple ownership for each of the comparable
sales, resulting in no required adjustment.
Financing
The sales were purchased with cash, or third-party financing which do not require adjustments.
Sale Conditions
Sale condition adjustments account for factors such as buyer or seller motivation, which affect
the purchase price. The sales were evaluated and no adjustments for sale conditions are
considered necessary for Sales 1, 2, and 3.
Market Conditions
The sales were transacted from March 2021 to October 2021. Adjustments for market
conditions are applied if property values have increased or decreased since the transaction
dates. Based on our observations and analysis, real estate has appreciated approximately 4%
annually. The sales are adjusted accordingly.
SALES COMPARISON APPROACH
59
Location
The subject is located at the northwest corner of Smith Street and Hill Street, in the city of
Denton, Denton County. The sales are similar in location to the subject and do not require
adjustments for location.
Physical Characteristics
Physical aspects are considered for each sale, and include size, age, condition, and quality.
Access
Access is defined as the points, or number of points available for ingress/egress to the subject
site or ease of access to the site from abutting roadways. Sale properties are adjusted based on
their inferiority/superiority as compared with the subject. The sales are similar in access as
compared to the subject, with no adjustment necessary.
Size
The subject comprises 25 mobile home lots. The sales range in size from 92 lots to 231 lots.
The size adjustment is based on the premise that, in general, the larger the number of lots, the
less its selling price on a per unit basis. Typically, a 5%-15% adjustment for size compared
to the subject is appropriate. A factor of approximately 5% is used. The sales are adjusted
+10%, +5%, and +10%, respectively for size.
Age
The subject was built in 1965. Sale No. 1 was built in 1970, Sale No. 2 in 1964, and Sale No. 3
in 1990. The subject’s effective age is estimated at 30 years, with significant remaining
economic life. Inadequate market data are available for an analysis to isolate precise factors for
perceived differences in effective age. However, effective age, in addition to the actual age of
structures, is considered an important consideration from a buyer standpoint. The adjustment is
calculated at 1% for every 3 years difference of effective age. The sales are adjusted -3%, -3%,
and -7% respectively.
Condition
The improvements are in fair to average condition. All three sales appear to be superior in
condition as compared to the subject. Sale 1 has concrete curbs, paved parking, and paved
roadways. Sale 2 has concrete curbs and concrete sidewalks, and paved parking and roadways.
Sale 3 has concrete curbs and paved roadways with covered concrete parking. The sales are
adjusted downward -15%, -15%, and -20%, respectively.
SALES COMPARISON APPROACH
60
Quality
Due to the varying construction designs and quality of the comparable sales, a degree of
subjectivity is likewise required in comparing the construction quality of the sale properties to
the subject. Inherent in this adjustment is recognition of the aesthetic appeal and finish of each
property. The subject is of average quality construction. The sales are similar in quality as
compared to the subject and are not adjusted.
Amenities
The subject has an additional structure (single-family residence) with provides additional income
for the property. Sales 1 and 2 do not have additional amenities and are adjusted upward 5%
each. Sale 3 has a pool and clubhouse which is considered to offset the subject’s single-family
residence, and an adjustment is not made.
The following grid summarizes the adjustment process.
Sale No.1 2 3
Year Built 1970 1964 1990
Size SF 174 Units 92 Units 231 Units
Sale Date Oct-21 Mar-21 Mar-21
Sale Price $11,500,000 $11,280,000 $9,231,235
Sale Price Per/Unit $66,092 $122,609 $39,962
Rights Conveyed -0--0--0-
Financing -0--0--0-
Sale Conditions -0--0--0-
Immediate Expenditures -0--0--0-
Market Conditions 7%9%9%
Adjusted Price/Unit $70,718 $133,644 $43,559
Location -0--0--0-
Access -0--0--0-
Size 10%5%10%
Age -3%-3%-7%
Condition -15%-15%-20%
Quality -0--0--0-
Amenities 5%5%-0-
Net Adjustment -3%-8%-17%
Adjusted Price/Unit $68,597 $122,952 $36,154
IMPROVED SALES ADJUSTMENTS
SALES COMPARISON APPROACH
61
CONCLUSIONS
In the per units analysis, the adjusted sales range from $36,154 to $122,952 per unit. Given the
size, quality, condition, and location of the subject, a unit value of $50,000 per unit is supported
by the sale data. This equates to an indicated value of $1,250,000.
Size/No. of Units $/Unit Indicated Value
25 x $50,000 =$1,250,000
$1,250,000
VALUE INDICATED BY THE SALES PRICE PER UNIT -
WHOLE
Value by Sales Comparison
INCOME CAPITALIZATION APPROACH
62
The premise of the income capitalization approach is that an indication of value can be derived
by capitalizing the net income a property will produce - under prudent management - at an
appropriate rate which reflects the current market conditions, trends, and investor requirements.
The approach is based on the principle of anticipation of future benefits, foremost of which is the
stream of annual net income for a holding period plus a capital sum at the end of that period. The
mechanism by which these benefits are translated to value i.e., present worth, is the capitalization
process.
INCOME CAPITALIZATION APPROACH
The income capitalization approach consists of the following steps:
Market Analysis: Research the market to determine relevant income parameters i.e.,
rental rate, vacancy rates, absorption trends, escalations,
allowances, and other factors.
Estimate of Operations: Estimate potential gross income. Then, deduct a vacancy and
collection loss allowance to derive effective gross income. Finally,
estimate and deduct expenses of operation to derive net operating
income.
Capitalization: Select an applicable capitalization method and technique. Develop
the appropriate rate or rates and capitalize the net operating income
or income stream to derive an indication of value.
As described above, the analysis of the market includes thorough research of the market to
determine relevant income parameters i.e., rental rate, vacancy rates, absorption trends, escalations,
allowances, and other factors. A summary of competing properties in the subject area is also
included the following pages.
INCOME CAPITALIZATION APPROACH
63
RENTALS MAP
INCOME CAPITALIZATION APPROACH
64
RENTAL NO. 1
Address 3750 Pockrus Paige Road
Denton, Denton County, Texas
Year of Construction 1992
Number of Units 114 units
Rental Rate Per Unit $450 to $750
Comments The property is located along the southern line of Pockrus Page
Road,east of Interstate Highway 35E.The property is identified
as Sherwood Mobile Home Park with 114 lots.Lot rates range
from $450 to $750 per month and include trash,water,and sewer.
The park is in overall average condition with no additional
amenities.
INCOME CAPITALIZATION APPROACH
65
RENTAL NO. 2
Address 2709 Justin Road
Flower Mound, Denton County, Texas
Year of Construction 2010
Number of Units 36 units
Rental Rate Per Unit $600.00
Lease Terms
Triple net 3-year term
Comments The property is located along the southern line of Justin Road,east
of Barnett Boulevard.The property is identified as The Parks
Mobile Home Park with 36 lots.Lot rates are $600 per month with
all utilities paid separately by the tenant.The park is in average
condition with no additional amenities.
INCOME CAPITALIZATION APPROACH
66
RENTAL NO. 3
Address 2800 Fort Worth Dr
Denton, Denton County, Texas
Year of Construction 1962
Number of Units 74 units
Rental Rate Per Unit $360 to $740
Lease Terms
Triple net; 5-years 2-month-term
Comments The property is located along the western line of Fort Worth Drive
at Country Club Road.The property is identified as Country View
Mobile Home Park with 74 lots.Lot rates range from $360 to $740
per month and includes trash and water.The property is in overall
average condition with an onsite manager.
INCOME CAPITALIZATION APPROACH
67
Rental No. Name/Location Rent/Unit Lease Basis YOC No./Units
1 3750 Pockrus Paige Road
Denton, Denton County, Texas
2 2709 Justin Road
Flower Mound, Denton County, Texas
3 2800 Fort Worth Dr
Denton, Denton County, Texas
RENTAL SURVEY
$450 to
$750
Per Month/Unit 1992 114 units
$600 Per Month/Unit 2010 36 units
$360 to
$740
Per Month/Unit 1962 74 units
The properties in the survey are similar to the subject and are comparable in design, construction,
and use. The facilities range in size from 36 units to 114 units. The lease rates of the survey
range from $360 to $750 per lot and are representative of market.
For the purpose for this analysis, we conclude the subject leases with the tenant paying electric
and gas, and the landlord responsible for water, sewer, and trash. Each of the comparable rents
varies in location and quality and differs in size as compared with the subject.
Market Rent and Gross Rental Income Analysis
In estimating the appropriate market rental rate for the subject, all the comparables were
considered. Considering the location of the subject, the quality of finish, careful consideration of
data and inspecting each comparable property, the data support a market rental rate of $450 per
lot with the tenant responsible for electric and gas. This estimate recognizes the location,
construction, size, quality, and condition of the subject as compared with competing properties in
the local market.
Potential Gross Income
Based on the estimated market rate, the potential gross income of the subject property is
$135,000 per year, or $450 per lot per month and $5,400 per lot annually.
Reimbursements
Under this lease arrangement, the tenant is responsible for electric and gas service
Reimbursements for these services are estimated at $18,000 annually for the mobile home park.
Additional Income – Single-Family Residential Lease
The property has one single-family residential unit which provides additional lease income. A
survey of single-family residential rentals in the Denton area are summarized below.
Rental No. Name/Location Rent/Mo SF YOC Status
1 1007 Oakland Street, Denton, Texas $950 720 1959 Leased
2 6098 Myrtle Street, Denton, Texas $1,200 600 1968 Leased
3 818 Ross Street, Denton, Texas $1,275 600 2020 Leased
4 722 Lakey Street, Denton, Texas $1,400 756 1980 Leased
5 521 Pearl Street, Denton, Texas $750 500 1926 Active
INCOME CAPITALIZATION APPROACH
68
The rentals indicate a range from $750 to $1,400 per month. Considering the size, age, and
condition of the residence, a market lease rate of $1,000 per month is concluded. The total
additional rental income for the subject is estimated at $12,000 annually.
Vacancy & Collection Loss
According to the Dictionary of Real Estate Appraisal, vacancy and collection (credit) loss is
defined as an allowance for reductions in potential income attributable to vacancies, tenant
turnover, and non-payment of rent. The portion referring to vacancy is typically derived from
market sources such as the market conditions of competing properties and the competitive
market. The collection loss is a reflection of the type of tenants within the market or subject.
In order to estimate anticipated vacancy and credit loss for the subject, relevant market data
sources have been researched, and the operating expenses and comparable properties have been
analyzed.
A survey of local management companies and rental properties show that there is a wide range of
vacancy rates in the area, which vary from 0% to 50%, with an average of approximately 5%.
The subject is approximately 96% occupied. Given the subject’s size, current/potential tenancy,
market occupancy rates, and location, a reasonable market vacancy and credit loss rate for the
subject is estimated at 5%, which equates to $8,250, or $330.00 per unit.
OPERATING EXPENSES
The following annual expense summary is estimated based on operations of similar properties in
the subject market. Expenses include both fixed and variable expenses. Fixed expenses include
ad valorem property taxes and property insurance. Variable expenses include
management/administrative and maintenance/repair costs. Typical leases on properties of this
type are structured with the tenant responsible for electric and gas and the landlord responsible
for water, trash, and sewer.
Where actual operating statements were not available for analysis, estimates are applied in the
expense estimates for the subject property.
INCOME CAPITALIZATION APPROACH
69
EXPENSES
Real Estate Taxes
Real estate taxes (as detailed previously in the tax analysis portion of the subject property
section) are estimated at $9,128 or $365.12 per unit. The basis of this expense is the county
appraisal district.
Fire & Extended Coverage Insurance
Based on information from third party reports, the estimated typical fire, extended coverage, and
liability policy is $8,000 or $320.00 per unit. The basis of this expense is market estimates and
data.
Utilities
The landlord is responsible for water, trash, and sewer with an estimated annual expense of
$9,000. The tenant reimburses the landlord for electric which is estimated at $18,000 annually.
The basis of these expenses is market estimates and data.
Management Fees
Includes general management, supervision, professional fees, legal fees, printing, keys and locks,
sign expenses, and purchasing, etc. Management fees in this market range between 3% and 8%
of effective gross income. Based on the market estimates and data, we utilize a 5% management
fee based on market estimates, which equates to $7,838 ($313.50 per unit).
Maintenance/Repairs
This category covers all normal annual maintenance and repair costs to the structure. This
expense includes such items as exterior repairs and roof repairs, as well as maintenance of the
equipment, including HVAC units, plumbing, electrical, and grounds. Based on information
from third party reports, repairs and maintenance are estimated at $6,000 or $240.00 per unit.
The basis of this expense is market estimates and data.
Reserves
Reserves are an appropriation from the income of the real estate that is allocated to deferred or
anticipated contingencies, such as maintenance. The basis of this expense is market estimates
and data. This expense is estimated at $3,500, or $140.00 per unit.
Expense Summary
Based on the foregoing, the expenses are estimated at $2,458.64 per unit or $61,466 per year.
INCOME CAPITALIZATION APPROACH
70
The following table represents the stabilized pro forma operating statement for the subject
property.
Number of Units 25 Units
Total $/Unit
Gross Rental Income 135,000$ 5,400.00$
Expense Reimbursements 18,000$ 720.00$
Other Income - Single family residential rental 12,000$ 480.00$
Total Potential Income 165,000$ 6,600.00$
Less: Vacancy @ 5%8,250$ 330.00$
Effective Gross Income 156,750$ 6,270.00$
Less: Expenses Reimbursed
Real Estate Taxes 9,128$ 365.12$
Insurance 8,000$ 320.00$
Utilities - reimbursed X 18,000$ 720.00$
Utilities - none reimbursed 9,000$ 360.00$
Management Fees (5% of EGI)7,838$ 313.50$
Structural Maintenance/Repairs 6,000$ 240.00$
Reserves 3,500$ 140.00$
Total Expenses 61,466$ 2,458.64$
Net Operating Income 95,284$ 3,811.36$
Net Income/Effective Gross Income Ratio 60.79%
INCOME AND EXPENSE SUMMARY
CAPITALIZATION
Two methods of developing rates for direct capitalization are illustrated below. First is the
market capitalization rate. This is an overall rate exhibited in the market and is the ratio between
the total net operating income (NOI) produced by the property and the sales price from the
property. Generally, the overall rate is extracted from the transactions of similar type properties.
Second is the band of investment method. This method considers the financial components, or
bands, of debt and equity capital required to support the investment.
Market Extracted - Capitalization Rate
In the sales comparison approach, the sales of similar properties are detailed. These sales
included actual or estimated pro forma income and expense information that allowed us to
extract capitalization rates from cash equivalent figures. In the sales comparison approach, the
pro-forma data indicate overall capitalization rates ranging from 7.0% to 11.2%.
Sale No.Name/Location OAR
1 2201 South State Highway 5 11.2%
2 2025 Carl Road 7.0%
3 7800 Mockingbird Lane 10.2%
Summary of Improved Sales
INCOME CAPITALIZATION APPROACH
71
The overall rate developed by the band of investment method is based on (1) the capitalization
rate for debt, called the mortgage constant, and (2) the rate of return required on equity, called
the equity capitalization rate. For the subject, a 25-year amortization period is used covering
70% of the value at 7.25% interest, and considering the characteristics of the subject, an equity
return of 10.00%. Using the band of investment method, the overall rate is developed as follows:
Amortization Period 25 years Mortgage Constant (Rm)
Loan-to-Value Ratio 70%
Equity Component 30%
Interest Rate (i)7.25%
Equity Dividend Rate (Re)10.00%
% Total Value Return Required
Loan 0.700 x 0.08674 (mortgage constant)=0.06072
Equity 0.300 x 0.10000 (equity dividend rate)=0.03000
Overall Rate 0.09072
Rounded 9.07%
-0.086737
Secondary data sources are noted regarding overall rates. Real Estate Research Corporation
(RERC) conducts a quarterly survey of major knowledgeable real estate participants. This
survey tracks target rates of return (discount rates) and capitalization rates for predominately
investment-grade properties. The specific criteria for apartment properties are most applicable to
the subject. The RERC survey indicates a going-in capitalization rate of 7.9%, for investment
grade apartment properties.
INCOME CAPITALIZATION APPROACH
72
INCOME CAPITALIZATION APPROACH
73
In addition to the RERC survey, the Realtyrates.com Market Survey shows average operating
data and investment data. The Realtyrates.com survey indicates target rates in the range of
6.14% to 13.48%, with an average of 9.81%.
An overall capitalization rate of 9.00% is judged to be appropriate for the subject. The net
operating income is capitalized using an overall rate of 9.00%, and results in a value indication
of ($95,284 ÷ 0.0900). Based on the foregoing, the income capitalization approach supports a
market value of $1,060,000.
Net Operating Income $95,284
Capitalization Rate 0.0900
Value Indicated By Direct Capitalization $1,058,711
Final Value by Direct Capitalization $1,060,000
=
RECONCILIATION – WHOLE PROPERTY VALUE
74
In the preceding sections of this report, the area data and trends, location amenities, highest and
best use, and other elements of value are discussed. The market was researched for comparable
data and market trends.
In the final analysis, considering the approaches to value, each approach is analyzed in terms of
the quantity and quality of the data used in each approach and applicability to estimate a reliable
value.
Summary of Approaches
Cost Approach N/A
Sales Comparison Approach $1,250,000
Income Capitalization Approach $1,060,000
RECONCILIATION – WHOLE PROPERTY VALUE
Sufficient sales of tracts of land with similar utility are available to arrive at an opinion of value
of the land by market comparison. The sales used are adjusted to reflect current market
conditions and differences in physical characteristics.
Land Value estimate at $5.50 per square foot $388,597
Cost Approach
The estimated costs are compared with the Marshall Valuation Service Cost Manual. Additionally,
a review of cost manuals, conversations with local building contractors and developers, and the
appraiser’s experience in valuing similar properties readily support these costs.
The cost approach is most applicable when a property is new or proposed and when the
development represents the highest and best use of the site. The effective age of the improvements
is estimated at 30 years. Overall, the cost approach is not a reliable valuation method for this
analysis.
Sales Comparison Approach
The price per unit is used in the sales comparison approach to provide an indication of value for
the subject. These transactions are considered to reflect the behavior of typical market
participants. Although the sales were somewhat different in age, size, and use, they provide
reasonable value indications of the subject, after adjustment for these various differences. The
value range produced by this approach is a reasonable indicator based on the best available
market data.
Income Capitalization Approach
The direct capitalization method is used in the income capitalization approach to develop an
indication of market value. Operating expenses are estimated based primarily on actual data
from other projects, subject historical records (if available), and data extracted from the tax rolls.
RECONCILIATION – WHOLE PROPERTY VALUE
75
The income capitalization approach is the best approach to determine market value when the real
estate market recognizes the value of a property based on the income it produces. The
comparables used are representative of market and provided a good indicator of the potential of
the subject property.
CONCLUSION
In conclusion, the sales comparison and income capitalization approaches are the most reliable
indicators due to both the quality and quantity of the available sale data and current rental market
data and provide a good basis for valuation. Based on the above considerations for the subject
property, our final opinion of the market value of the subject in the whole property condition is
as follows:
Whole Property (Market Value) $1,250,000
PART TO BE ACQUIRED
76
Part To Be Acquired
Part to be acquired
The proposed part to be acquired is in permanent utility easement estate. Per the enclosed parcel
survey and field notes, the part to be acquired in permanent easement totals 6,142 square feet or
0.1410 acres. The easement will be used for the expansion of an existing overhead electric
transmission line.
The permanent utility easement is 336.77 feet in length along northern boundary, and with depths
of 18.10 feet on the western boundary, and 18.47 feet on the eastern boundary.
Also situated in and/or proximate to the acquisition area are utility lines and appurtenances, such as
utility equipment, signs, and markers. These items are assumed the property of other-unrelated
entities of subject ownership. It is assumed that the City of Denton will negotiate the successful
movement of these items where necessary, and without burden to the subject owner.
Landowner improvements situated in the proposed easement area include gravel paving, fencing,
landscaping, and two manufactured homes. Items that appear to be the property of others (other than
the subject owner) are not considered in the valuation of the subject. The city of Denton or its
contractors will restore any site improvements in the permanent easement to as good or better
condition upon completion of construction. Therefore, the site improvements are excluded.
Quantity
2
Improvements Located in Permanent Easement
Parcel - Spencer to Locust - ROW - EME Project
Denton, Denton County Texas
Improvements
Number of Units
Landscaping
According to the City of Denton project engineer, two of the manufactured homes partially located
in the proposed permanent easement will be allowed to remain on the subject, will continue to have
a certificate of occupancy, and will not be adversely impacted as a result of the project.
Highest and Best Use
The part to be acquired is a small parcel and would not be developed as a separate property. Its
highest and best use is as part of the whole property.
Since the area to be acquired is not an economic unit, a value estimate cannot be supported by a
direct comparison with comparable data in the market. As a result, the proposed acquisition is
valued as a part of the whole property.
PART TO BE ACQUIRED
77
PART TO BE ACQUIRED
78
The proposed acquisition extends through land that includes site and building improvements. The
city of Denton or its contractors will restore any site improvements in the permanent easement to as
good or better condition upon completion of construction. The compensation due the property
owner for the part acquired is comprised of land value and damages to the remainder.
Valuation of the Permanent Easement Acquisition
The part to be acquired in easement estate is a permanent utility easement. The permanent utility
easement acquisition will result in an encumbrance of 8.7% of the subject (6,142 square feet ÷
70,654 square feet = 0.087).
The proposed easement is not considered to be an economic unit within itself, due to the small
size and shape, and the highest and best use of the parcel is considered as a part of the whole
property. The whole property land value is previously established at $5.50 per square foot. The
value of the easement land immediately before the imposition of the permanent utility easement
equates to $33,781 for a total of 6,142 square feet.
Fee Simple Value Permanent Utility Easement 6,142 SF x $5.50 x 100%=33,781$
After the imposition of the easement, the land in the easement areas is restricted. The property
owner can continue to use the land but cannot use the easement land in any manner that will
prevent or interfere with the grantee’s uses or rights and cannot construct any building or other
structure within the easement area, and cannot change the grade, remove dirt from the surface of
the easement or impound water over the easement without the prior approval of the grantee. The
easement holder may cut all trees from the easement area. The property owner is relinquishing
certain rights in perpetuity to the easement holder. The property owner still incurs certain
obligations within the area of the easement including the cost to maintain the surface and
payment of ad valorem taxes.
Limited market data are available that demonstrate the value of these rights. For the land
encumbered by the permanent utility easement, it is our opinion that the property owner is giving
rights to the easement holder that equate to 90% of the fee simple value of the land. The
proposed permanent utility easement traverses the property from east to west along the southern
property line.
Immediately after the imposition of the easement, the value of the land within the existing utility
easement is considered to be no more than 10% of the fee simple value of the land. The resulting
value of the permanent utility easement is calculated as follows:
Fee Simple Value Permanent Utility Easement 6,142 SF x $5.50 x 100%=33,781$
Less:
Value after imposition of Permanent Easement 6,142 SF x $5.50 x 10%=3,378$
Easement Value 30,403$
In our opinion, the total value of the part to be acquired in easement estate, including land and
improvements is $30,403.
REMAINDER BEFORE THE ACQUISITION
79
Remainder Before the Acquisition
The indicated value of the remainder before the taking is derived by deducting the projected
value of the take from the value of the whole property. The calculation is as follows:
REMAINDER BEFORE THE ACQUISITION
Opinion of value - whole property 1,250,000$
Opinion of value - taking 30,403$
Opinion of value - remainder before the taking 1,219,597$
REMAINDER AFTER THE ACQUISITION
80
Remainder After the Acquisition
The remainder after the acquisition is valued by a separate analysis of the property addressing
physical characteristics, highest and best use, utility, and marketability.
After the acquisition, an estimated two mobile home units are affected. It is assumed these two
mobile homes will have to be removed as there appears to be no available space on the property
to relocate them. In the remainder after, the subject has two parking spaces per remaining
dwelling units. The proposed permanent utility easement does not change the required parking
per unit. In the remainder after, the subject will have 23 lots and a single-family residence.
The remainder after the taking is reduced from the whole property an includes a small area
encumbered by the easement. The remainder land area is 70,654 square feet, or 1.622 acres,
including the part taken in the permanent utility easement (6,142 square feet). The easement is
situated in an area that includes some parking spaces, setbacks, or landscaping areas. The
highest and best use of the remainder land is continued use as a mobile home park. While the
taking does not diminish the remainder’s potential, it will result in an encumbrance of
approximately 8.7% of the whole property land area (6,142 square feet ÷ 70,654 square feet =
0.087
As if complete and in place, the project improvements are a general enhancement in the
neighborhood and are not judged to enhance a specific property.
Highest & Best Use – As if Vacant
In the remainder condition, the subject property is encumbered by a permanent utility easement
from east to west along the southern property line. The subject fronts 336.03 feet along the
northern line of Smith Street, and 174.65 feet along the western line of Hill Street. The subject is
approximately 189 feet deep, along the western property line. According to the enclosed flood
map No. 48121C0360G, the subject is determined to be outside the 100-year floodplain, being
within Zone 'X'. The site is of sufficient size, shape, and frontage to be economically adaptable
to numerous uses.
Permissible Use: The site is zoned by the City of Denton. The R7, Residential district is
intended to accommodate a variety of housing types on lots designed to encourage walking to
neighborhood-serving retail and other amenities such as parks and school facilities. This zoning
district will ensure existing neighborhood character is maintained while also contributing to a
safe environment for pedestrians and bicyclists. This district can also serve to support
compatibility between single-family neighborhoods and higher-intensity mixed-use or
nonresidential.
REMAINDER AFTER THE ACQUISITION
81
Feasible Use: The surrounding properties and land uses are considered for compatibility in
determination of feasible use. The subject abuts single family residential development along the
north side, industrial uses across Hill Street along the east side, industrial uses and a mini-storage
facility across Smith Street along the south side, and a one-story, multi-tenant office building
along the west side. Based on the land usage pattern of the surrounding area, the layout, location
and frontage/visibility of the site, the most feasible use is considered to be for residential
development.
Maximally Productive Highest & Best Use: For residential development, the location is
considered average for appeal within the submarket. Access is rated as average and exposure of
the subject is rated as average. Electricity, water, sewer, and telecommunication services are
available to the subject. Based on the foregoing and land use patterns, the highest and best use of
the subject tract is for residential development, as demand emerges in the market.
HIGHEST & BEST USE AS IMPROVED
Possible Use: The improvements were built in 1965 according to the Denton County Appraisal
District. The improvements are of average quality and in fair to average condition. Overall, the
improvements are adequately maintained and have no deferred maintenance. The intended use
of the improvements is for single-family residential and mobile home park use. The physical
characteristics and accompanying amenities support the continued use as such.
Permissible Use: The site is zoned City of Denton by the City of Denton. The R7, Residential
district is intended to accommodate a variety of housing types on lots designed to encourage
walking to neighborhood-serving retail and other amenities such as parks and school facilities.
This zoning district will ensure existing neighborhood character is maintained while also
contributing to a safe environment for pedestrians and bicyclists. This district can also serve to
support compatibility between single-family neighborhoods and higher-intensity mixed-use or
nonresidential. Single-family residential and mobile home parks are allowed in this zoning
district.
Feasible Use: The existing improvements have an effective age of approximately 30 years,
based on the modified economic life concept. With proper maintenance, a property of this type
typically has a useful life of 55 years. Remaining economic life of the improvements is
estimated at 25 years, based on a useful life of 55 years and an effective age of 30 years, and no
other use of the improvements could provide a greater return in the current market.
Maximally Productive Highest & Best Use: As improved, the property is improved with a
single-family residence and mobile home park and is suitable for this use. Therefore, the
continued use as a mobile home park represents the highest and best use of the land and
improvements.
LAND VALUATION - REMAINDER AFTER
82
LAND VALUATION – REMAINDER AFTER
Sale No.1 2 3
No. of Acres 1.580 3.060 2.608
Size - SF 68,816 133,280 113,609
Sale Date Jun-23 May-23 Jun-22
Sale Price $402,000 $900,000 $350,000
Sale Price Per SF $5.84 $6.75 $3.08
Rights Conveyed 0%0%0%
Financing 0%0%0%
Sale Conditions 0%0%0%
Market Conditions 0%1%4%
Adjusted Price $5.84 $6.82 $3.20
Location 0%0%0%
Access 0%-5%0%
Frontage 0%-5%5%
Exposure 0%0%0%
Size 0%5%4%
Zoning 0%0%0%
Utilities 0%0%0%
Topography 0%0%0%
Net Adjustment 0%-5%9%
Adjusted Price/SF $5.84 $6.48 $3.49
LAND SALES ADJUSTMENTS - REMAINDER
Remainder After Value
The adjusted land sales in the remainder after range from $3.49 to $6.48 per square foot.
Considering the adjusted sales, the remainder land is valued at $5.50 per square foot. In the
remainder after, after the imposition of the easement, the area encumbered by the permanent
easement, is valued at 10% of the fee simple value (10% of $33,781) or $3,378. The value of the
remainder land after the acquisition is $358,194, including the permanent easement.
Land Within Permanent Easement 6,142 SF x $5.50 x 10%=3,378$
Unencumbered Land 64,512 SF x $5.50 x 100%=354,816$
Total 70,654 SF 358,194$
COST APPROACH - REMAINDER AFTER
83
The purpose of the cost approach is to develop an opinion of the cost to construct a reproduction of,
or replacement for, the existing structure and then deduct all accrued depreciation in the property
being appraised from the cost new of the reproduction or replacement structure. When the value of
the land and an entrepreneurial profit, if appropriate, are added to this figure, the result is an
indication of the value of the fee simple interest in the property.
COST APPROACH – REMAINDER AFTER
When applicable, the cost approach reflects market thinking by recognizing that market
participants relate value to cost. Investors tend to judge the value of an existing structure by
considering the prices and rents of similar buildings and the cost to create a new building with
optimal physical and functional utility. Investors adjust the prices they are willing to pay by
estimating the costs to bring an existing structure up to the level of physical and functional utility
they desire.
COST APPROACH AS APPLICABLE TO THIS ASSIGNMENT
The subject, having an effective age of 30 years, suffers from a degree of physical depreciation.
In our experience, buildings of this age will have been rehabilitated from time to time, but not
necessarily in a comprehensive manner. The subject appears to be in fair to average condition,
having been adequately maintained which is the basis for the reduced effective age. Different
areas of the improvement spaces typically exhibit different degrees of condition and quality.
The cost approach would likely be the least reliable approach to value due to the speculative cost
and depreciation estimates on the existing improvements. Moreover, the cost approach to value
of real estate with existing improvements of the subject's age is not typically a reliable indicator
of market value when considering the use, and the degree of perceived depreciation applied to
the structure. The subjective nature of concluding depreciation to the structure in this instance
outweighs the construction elements of the cost approach with regard to an overall valuation.
Thus, the cost approach is not used in this assignment.
SALES COMPARISON APPROACH - REMAINDER AFTER
84
The sales comparison approach is a method of estimating market value whereby a property is
compared with similar properties that have sold recently. One premise of the sales comparison
approach is that the market will determine a price for the property being appraised in the same
manner that it determines the price of comparable, competitive properties. The principle of
substitution is basic in this approach as it implies that a prudent person will not pay more for a
property than an acceptable alternative available in the market.
SALES COMPARISON APPROACH – REMAINDER AFTER
The steps of the sales comparison approach are outlined as follows:
(a) Research the market to obtain information about sales, listings, and offerings of
properties similar to the subject property.
(b) Ascertain the nature of the conditions of sale, including the price, terms, motivating
forces, and its bona fide nature.
(c) Determine relevant units of comparison, price per unit or sales price per square foot and
develop a comparative analysis for each unit.
(d) Compare each of the comparable properties' important attributes to the corresponding
ones of the property being appraised, under the general categories of time, location,
physical characteristics, and conditions of sale.
Consider all dissimilarities and their probable effect on the price of each sale property to
derive individual market indications for the property being appraised.
(e) Formulate, in light of the comparison thus made, an opinion of the relative value of the
subject property as a whole, or where appropriate, by applicable units, compared with
each of the similar properties.
In the sales comparison approach, the property appraised is compared with known prices paid for
similar properties in the open market. Typically, for most properties, the most common units of
comparison used are the overall price paid per unit, and sales price per square foot.
The same improved sales used in the whole property valuation are used for the sales comparison
approach in the remainder after.
SALES COMPARISON APPROACH - REMAINDER AFTER
85
The following grid summarizes the adjustment process.
Sale No.1 2 3
Year Built 1970 1964 1990
Size SF 174 Units 92 Units 231 Units
Sale Date Oct-21 Mar-21 Mar-21
Sale Price $11,500,000 $11,280,000 $9,231,235
Sale Price Per/ Unit $66,092 $122,609 $39,962
Rights Conveyed -0--0--0-
Financing -0--0--0-
Sale Conditions -0--0--0-
Immediate Expenditures -0--0--0-
Market Conditions 7%9%9%
Adjusted Price/Unit $70,718 $133,644 $43,559
Location -0--0--0-
Access -0--0--0-
Size 10%5%10%
Age -3%-3%-7%
Condition -15%-15%-20%
Quality -0--0--0-
Amenities 5%5%-0-
Net Adjustment -3%-8%-17%
Adjusted Price/Unit $68,597 $122,952 $36,154
IMPROVED SALES ADJUSTMENTS
CONCLUSIONS
In the per unit analysis, the adjusted sales range from $36,154 to $122,952 per unit. Given the
size, quality, condition, and location of the subject a unit value of $50,000 per unit is supported
by the sale data. This equates to an indicated value of $1,150,000, rounded.
Size/No. of Units $/Units Indicated Value
23 x $50,000 =$1,150,000
$1,150,000
VALUE INDICATED BY THE SALES PRICE PER UNIT -
REMAINDER
Value by Sales Comparison
INCOME APPROACH - REMAINDER AFTER
86
The premise of the income capitalization approach is that an indication of value can be derived
by capitalizing the net income a property will produce - under prudent management - at an
appropriate rate which reflects the current market conditions, trends, and investor requirements.
The approach is based on the principle of anticipation of future benefits, foremost of which is the
stream of annual net income for a holding period plus a capital sum at the end of that period. The
mechanism by which these benefits are translated to value i.e., present worth, is the capitalization
process.
INCOME CAPITALIZATION APPROACH – REMAINDER AFTER
The income capitalization approach consists of the following steps:
Market Analysis: Research the market to determine relevant income parameters i.e.,
rental rate, vacancy rates, absorption trends, escalations,
allowances, and other factors.
Estimate of Operations: Estimate potential gross income. Then, deduct a vacancy and
collection loss allowance to derive effective gross income. Finally,
estimate and deduct expenses of operation to derive net operating
income.
Capitalization: Select an applicable capitalization method and technique. Develop
the appropriate rate or rates and capitalize the net operating income
or income stream to derive an indication of value.
As described above, the analysis of the market includes thorough research of the market to
determine relevant income parameters i.e., rental rate, vacancy rates, absorption trends, escalations,
allowances, and other factors. A summary of competing properties in the subject area is
summarized in the following table.
Rental No. Name/Location Rent/Unit Lease Basis YOC No./Units
1 3750 Pockrus Paige Road
Denton, Denton County, Texas
2 2709 Justin Road
Flower Mound, Denton County, Texas
3 2800 Fort Worth Dr
Denton, Denton County, Texas
RENTAL SURVEY
$450 to
$750
Per Month/Unit 1992 114 units
$600 Per Month/Unit 2010 36 units
$360 to
$740
Per Month/Unit 1962 74 units
The properties in the survey are similar to the subject and are comparable in design, construction,
and use. The facilities range in size from 36 units to 114 units. The lease rates of the survey
range from $360 to $750 per units with the landlord responsible for water, trash, and sewer, and
the tenant reimbursing the landlord for electric and gas service. This type of lease is
representative of the market area.
Each of the comparable rents varies in location and quality and differs in size as compared with
the subject.
INCOME APPROACH - REMAINDER AFTER
87
Market Rent and Gross Rental Income Analysis
In estimating the appropriate market rental rate for the subject, all the comparables were
considered. Considering the location of the subject, the quality of finish, careful consideration of
data and inspecting each comparable property, the data support a market rental rate of $450 per
unit. This estimate recognizes the location, construction, size, quality, and condition of the
subject as compared with competing properties in the local market.
Potential Gross Income
Based on the estimated market rate, the potential gross income of the subject property is
$124,200 per year or $450 per unit per month, for the remaining 23 units.
Reimbursements
Under this lease arrangement, the tenant is responsible for electric and gas service
Reimbursements for these services are estimated at $16,560 annually for the mobile home park.
Additional Income – Single-Family Residential Lease
The property has one single-family residential unit which provides additional lease income. A
survey of single-family residential rentals in the Denton area are summarized below.
Rental No. Name/Location Rent/Mo SF YOC Status
1 1007 Oakland Street, Denton, Texas $950 720 1959 Leased
2 6098 Myrtle Street, Denton, Texas $1,200 600 1968 Leased
3 818 Ross Street, Denton, Texas $1,275 600 2020 Leased
4 722 Lakey Street, Denton, Texas $1,400 756 1980 Leased
5 521 Pearl Street, Denton, Texas $750 500 1926 Active
The rentals indicate a range from $750 to $1,400 per month. Considering the size, age, and
condition of the residence, a market lease rate of $1,000 per month is concluded. The total
additional rental income for the subject is estimated at $12,000 annually.
Vacancy & Collection Loss
According to the Dictionary of Real Estate Appraisal, vacancy and collection (credit) loss is
defined as an allowance for reductions in potential income attributable to vacancies, tenant
turnover, and non-payment of rent. The portion referring to vacancy is typically derived from
market sources such as the market conditions of competing properties and the competitive
market. The collection loss is a reflection of the type of tenants within the market or subject.
In order to estimate anticipated vacancy and credit loss for the subject, relevant market data
sources have been researched, and the operating expenses and comparable properties have been
analyzed.
INCOME APPROACH - REMAINDER AFTER
88
A survey of local management companies and rental properties show that there is a wide range of
vacancy rates in the area, which vary from 0% to 50%, with an average of approximately 5%.
The subject is currently 96% occupied. Given the subject’s size, current/potential tenancy,
market occupancy rates, and location, a reasonable market vacancy and credit loss rate for the
subject is estimated at 5%, which equates to $7,638 or $332.09 per unit.
OPERATING EXPENSES
The following annual expense summary is estimated based on operations of similar properties in
the subject market. Expenses include both fixed and variable expenses. Fixed expenses include
ad valorem property taxes and property insurance. Variable expenses include
management/administrative and maintenance/repair costs. Typical leases on properties of this
type are structured with the tenant responsible for electric and gas and the landlord responsible
for water, trash, and sewer.
Where actual operating statements were not available for analysis, estimates are applied in the
expense estimates for the subject property.
EXPENSES
Real Estate Taxes
Real estate taxes (as detailed previously in the tax analysis portion of the subject property
section) are estimated at $9,128 or $396.87 per unit. The basis of this expense is the county
appraisal district.
Fire & Extended Coverage Insurance
Based on information from third party reports, the estimated typical fire, extended coverage, and
liability policy is $8,000 or $347.83 per unit. The basis of this expense is market estimates and
data.
Utilities
The landlord is responsible for water, trash, and sewer with an estimated annual expense of
$8,280. The tenant reimburses the landlord for electric which is estimated at $16,560 annually.
The basis of these expenses is market estimates and data.
Management Fees
Includes general management, supervision, professional fees, legal fees, printing, keys and locks,
sign expenses, and purchasing, etc. Management fees in this market range between 3% and 8% of
effective gross income. Based on the market estimates and data, we utilize a 5% management fee
based on market estimates, which equates to $7,256 ($315.48 per unit).
INCOME APPROACH - REMAINDER AFTER
89
Maintenance/Repairs
This category covers all normal annual maintenance and repair costs to the structure. This expense
includes such items as exterior repairs and roof repairs, as well as maintenance of the equipment,
including HVAC units, plumbing, electrical, and grounds. Based on information from third party
reports, repairs and maintenance are estimated at $5,520 or $240.00 per unit. The basis of this
expense is market estimates and data.
Reserves
Reserves are an appropriation from the income of the real estate that is allocated to deferred or
anticipated contingencies, such as maintenance. The basis of this expense is market estimates
and data. This expense is estimated at $3,500 or $152.17 per unit.
Expense Summary
Based on the foregoing, the expenses are estimated at $2,532.35 per unit or $58,244 per year.
The following table represents the stabilized pro forma operating statement for the subject
property.
Number of Units 23 Units
Total $/Unit
Gross Rental Income 124,200$ 5,400.00$
Expense Reimbursements 16,560$ 720.00$
Other Income - Single family residential rental 12,000$ 521.74$
Total Potential Income 152,760$ 6,641.74$
Less: Vacancy @ 5%7,638$ 332.09$
Effective Gross Income 145,122$ 6,309.65$
Less: Expenses Reimbursed
Real Estate Taxes 9,128$ 396.87$
Insurance 8,000$ 347.83$
Utilities - reimbursed X 16,560$ 720.00$
Utilities - not reimbursed 8,280$ 360.00$
Management Fees (5% of EGI)7,256$ 315.48$
Structural Maintenance/Repairs 5,520$ 240.00$
Reserves 3,500$ 152.17$
Total Expenses 58,244$ 2,532.35$
Net Operating Income 86,878$ 3,777.30$
Net Income/Effective Gross Income Ratio 59.87%
INCOME AND EXPENSE SUMMARY
INCOME APPROACH - REMAINDER AFTER
90
An overall capitalization rate of 9.00% is judged to be appropriate for the subject. The net
operating income is capitalized using an overall rate of 9.00%, and results in a value indication
of $965,311 ($86,878 ÷ 0.0900). Based on the foregoing, the income capitalization approach
supports a market value of $965,000, rounded.
Net Operating Income $86,878
Capitalization Rate 0.0900
Value Indicated By Direct Capitalization $965,311
Final Value by Direct Capitalization $965,000
=
RECONCILIATION - REMAINDER AFTER
91
In the preceding sections of this report, the area data and trends, location amenities, highest and
best use, and other elements of value are discussed. The market was researched for comparable
data and market trends.
In the final analysis, considering the approaches to value, each approach is analyzed in terms of
the quantity and quality of the data used in each approach and applicability to estimate a reliable
value.
Summary of Approaches
Cost Approach N/A
Sales Comparison Approach $1,150,000
Income Capitalization Approach $965,000
RECONCILIATION – REMAINDER AFTER
Sufficient sales of tracts of land with similar utility are available to arrive at an opinion of value
of the land by market comparison. The sales used are adjusted to reflect current market
conditions and differences in physical characteristics.
Land Value estimate at $5.50 per square foot $358,194
Cost Approach
The estimated costs are compared with the Marshall Valuation Service Cost Manual. Additionally,
a review of cost manuals, conversations with local building contractors and developers, and the
appraiser’s experience in valuing similar properties readily support these costs.
The cost approach is most applicable when a property is new or proposed and when the
development represents the highest and best use of the site. The effective age of the improvements
is estimated at 30 years. Overall, the cost approach is not a reliable valuation method for this
analysis.
Sales Comparison Approach
The price per unit is used in the sales comparison approach to provide an indication of value for
the subject. These transactions are considered to reflect the behavior of typical market
participants. Although the sales were somewhat different in age, size, and use, they provide
reasonable value indications of the subject, after adjustment for these various differences. The
value range produced by this approach is a reasonable indicator based on the best available
market data.
Income Capitalization Approach
The direct capitalization method is used in the income capitalization approach to develop an
indication of market value. Operating expenses are estimated based primarily on actual data
from other projects, subject historical records (if available), and data extracted from the tax rolls.
RECONCILIATION - REMAINDER AFTER
92
The income capitalization approach is the best approach to determine market value when the real
estate market recognizes the value of a property based on the income it produces. The
comparables used are representative of market and provided a good indicator of the potential of
the subject property.
CONCLUSION
In conclusion, the sales comparison and income capitalization approaches are the most reliable
indicators due to both the quality and quantity of the available sale data and current rental market
data and provide a good basis for valuation. Based on the above considerations for the subject
property, our final opinion of the market value of the subject in the reminder property condition
is as follows:
Remainder Property (Market Value) $1,150,000
SUMMARY OF COMPENSATION
93
SUMMARY OF COMPENSATION
The total compensation consists of the value of the part acquired in permanent easement estate
and damages to the remainder.
Damages to the remainder results from the loss of two mobile home units. The total number of
units of 25 is utilized in the before condition with a total number of units of 23 calculated in the
remainder.
According to the City of Denton project engineer, two of the manufactured homes partially located
in the proposed permanent easement will be allowed to remain on the subject, will continue to have
a certificate of occupancy, and will not be adversely impacted as a result of the project.
Cost To Cure
Within the acquisition area, the property is improved with gravel paving, fencing, and
landscaping.
The city of Denton or its contractors will restore any site improvements in the permanent easement
to as good or better condition upon completion of construction. Therefore, there are not any costs to
cure.
TOTAL COMPENSATION
The total compensation due to the landowner for the part acquired is $100,000.
Whole Property 1,250,000$
Part To Be Acquired in Easement 30,403$
Remainder - Before the Acquisition 1,219,597$
Remainder - After the Acquisition 1,150,000$
Damages 69,597$
Total Compensation 100,000$
APPRAISER’S CERTIFICATE
94
The undersigned do hereby certify that, except as otherwise noted in this appraisal report:
APPRAISER’S CERTIFICATE
We have no present or contemplated future interest in the real estate that is the subject of this
appraisal report. We have no personal interest or bias with respect to the subject matter of this
appraisal report or the parties involved. Our engagement in this assignment was not contingent
upon developing or reporting predetermined results. Our compensation for completing this
assignment is not contingent upon the development or reporting of a predetermined value or
direction in value that favors the cause of the client, the amount of the value opinion, the
attainment of a stipulated result, or the occurrence of a subsequent event directly related to the
intended use of this appraisal.
To the best of our knowledge and belief, the statements of fact contained in this appraisal report,
upon which analyses, opinions and conclusions expressed herein are based, are true and correct.
This appraisal report sets forth all of the assumptions and limiting conditions (imposed by the
terms of our assignment or by the undersigned) affecting the analyses, opinions, and conclusions
contained in this report. These are our personal, impartial, unbiased professional analyses,
opinions, and conclusions.
This appraisal report has been made in conformity with the Uniform Standards of Professional
Appraisal Practice. We certify that, to the best of our knowledge and belief, the reported
analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the requirements of the Code of Professional Ethics and the Standards of
Professional Practice of the Appraisal Institute and in conformity with the rules of the Texas
Real Estate Commission. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
The Appraisal Institute conducts a program of continuing education for its members. As of the
date of this report, Richard McBride has completed the Standards and Ethics Education
Requirements for Practicing Affiliates of the Appraisal Institute..
The Appraisal Institute conducts a program of continuing education for its members. As of the
date of this report, Kathleen Foley has completed the Standards and Ethics Education
Requirements for Practicing Affiliates of the Appraisal Institute.
We have performed no services as an appraiser, or in any other capacity, regarding the property
that is the subject of this report within the three-year period immediately preceding acceptance of
this assignment. No one provided real property appraisal assistance to the persons signing this
certification. We certify that Richard McBride and Kathleen Foley personally inspected the
property appraised.
PYLES WHATLEY CORPORATION
Richard McBride Kathleen Foley
State of Texas Certification #TX-1380335-G State of Texas Certification #TX-1380509-G
APPRAISER QUALIFICATIONS
95
APPRAISER QUALIFICATIONS
RICHARD C. MCBRIDE
Appraisal assignments include retail centers, existing and proposed office buildings, commercial
and industrial properties, and multi-family residential. Additional consulting assignments include
condemnation and right-of-way work, and other various consulting assignments.
Experience
Appraiser with Pyles Whatley Corporation since 2007; Partner in the company
since 2018
Over fifteen years’ experience in appraising various real property interests in Texas and Oklahoma
Education
Numerous Appraisal Courses offered by the Appraisal Institute Right-of-way courses offered by the International Right of Way Association
Richland College
o Engineering
o General studies
Professional
Texas Appraiser Licensing and Certification Board
o Certified General Real Estate Appraiser #TX-1380335-G
Appraisal Institute
o Practicing Affiliate
International Right of Way Association, Chapter 36, Member
APPRAISER QUALIFICATIONS
96
KATHLEEN A. FOLEY
Appraisal assignments include retail centers, office buildings, commercial and industrial properties, land
development, multi-family residential, right-of-way, and easements.
Experience
Independent appraiser 1996-present
Las Vegas Appraisal, Inc, 1993-1996
Education
Numerous Appraisal Courses offered by the Appraisal Institute Right-of-way courses offered by the International Right of Way Association
University of Nevada, Las Vegas
Bachelor of Science-Finance
Professional
Texas Appraiser Licensing and Certification Board
Certified General Real Estate Appraiser #TX 1380509-G
Nevada Real Estate Division
Certified General Real Estate Appraiser NV# A.0002152-CG
Appraisal Institute
Practicing Affiliate
International Right of Way Association
Chapter 36 - Member
Texas Real Estate Commission
Real Estate Broker #TX 696961
Nevada Real Estate Division
Broker Salesperson NV# BS.0034463
97
ADDENDA
98
PARCEL SURVEY/FIELD NOTES
99
100
TAX INFORMATION
101
TAX INFORMATION – Continued
102
ZONING INFORMATION
103
ZONING INFORMATION – Continued
LETTER OF NOTICE
USPS CERTIFIED/RETURN RECEIPTS
Return Receipt Not Received