# 20210329005314r305 Valuation Practice Problems

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Real Estate
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Indiana University Purdue University Indianapolis
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Class: R305/X574: Spring 2021
Valuation Practice Problems
This assignment is worth 50 total points. The points assigned to each question is noted with the question. You must
Question 1 (15 points)
Complete a cost approach valuation using the following information:
The subject is a 64,000 SF warehouse building (3% of the total square footage has office build-out). The
property has a 160,000 SF parking lot on a 6.60-acre lot.
Land values in the area are \$3.50/SF (remember, there are 43,560 SF in an acre).
Building hard costs = \$43.00/SF for warehouse and \$48.50/SF for interior office build-out (must be added
to the base warehouse cost for the portion of the building that has office-build out)
Parking lot costs = \$5.50/SF
Soft costs = 11%
Entrepreneurial incentive = 15%
Effective age: 5 years
Economic life: 45 years
Round your answer to the nearest \$10,000. Present the final value in whole dollars and \$/SF.
Depreciated costs have been estimated by the value of the dollar in 2016, the year the building was built.
\$100 in 2021 is worth \$89 in 2016 i.e., 89% of today’s value.
- Total Land value: (6.6 acre* 43,560 SF) * \$3.50 = \$1,006,000.
- Depreciated Total Land value: 89% Total Land value = \$895,000 (\$3.11/SF).
a) Parking lot
Building costs: \$5.50 * 160,000 SF = \$880,000.
Depreciated Building cost: 89% of building cost = \$783,000 (\$4.89/SF).
b) Warehouse
Warehouse-only building cost: (64,000 SF 3%) * \$43 = \$2,669,000.
Office building cost: (64,000 SF * 3%) * \$48.50 = \$93,000.

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Total Warehouse building cost: \$2,762,000.
Depreciated Warehouse building cost: 89% of building cost = \$2,458,000 (\$38.4/SF).
Total Depreciated Property building cost: Depreciated Land value + depreciated parking lot building cost +
depreciated warehouse building cost = \$4,136,000 (\$18.46/SF for 224,000 built SF).
Total Depreciated Property value: Total Depreciated Property building cost + Soft costs +
Entrepreneurial incentive = \$5,170,000 (\$23.08/SF on 224,000 total built SF; or \$80.78/SF on 64,000
SF warehouse).
Question 2 (15 points)
Complete a sales comparison approach using the following data:
In your adjustment grid on the following page, round all adjustments to the nearest percentage. Include a +
independent of all other adjustments. The location/physical adjustments are cumulative and should be
Not all items will require adjustment. Remember, comparables are adjusted to the subject, so a superior
characteristic would be adjusted downward, and an inferior characteristic would be adjusted upward.
Subject property:
64,000 SF warehouse
Sales A-D are all warehouses.
Market conditions adjustments are applied before all the other adjustments. Market conditions were stable
from late 2019 until July 2020, when market conditions improved 30% due to demand for warehouse space

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Anonymous
I was having a hard time with this subject, and this was a great help.

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