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INCOME APPROACH <br />The Income Approach is the consideration of the present value of future <br />benefits. This is generally measured by the net income which a fully <br />informed person would assume the property ?rill produce during its <br />remaining life. After comparison with investments of a similar type, the <br />net income is then capitalized into an estimate of value. <br />The Income Approach was done considering the property as warehouse <br />space, and in an "as is" condition (appraiser did consider equipment <br />removed and basic clean-up, however). Additionally, the imbalance of <br />supply (high) and demand (relatively low locally) was a significant factor. <br />San Marcos is now attempting to attract new industry to absorb the <br />existing space, and existing industry is not expanding to absorb this space. <br />The rental rates estimates were selected based upon the question "what <br />rental rate would entice an industry or business to relocate, either from <br />south Austin, New Braunfels, other outlying areas, or San Marcos ?" Local <br />and surrounding quoted monthly rental rates (warehouse space) were <br />examined(see addenda for rental data). Locally, the asking rate was <br />discounted approx. 25-40%. Outlying area rates were discounted more, as <br />the greater distance would require a greater reduction. <br />Calculations <br />f) main building-upstairs and downstairs <br />approx. X52,635 sq.ft. X 12.5 centslsq.ft.= $6,579.00 <br />2) metal warehouses <br />approx. 15,075 sq.ft. X 10 cents/sq.ft.= $1,508.00 <br />3 & 4) concrete brick warehouses <br />approx. 23,880 sq.ft X 15 centslsq.ft.= $3,582.00 <br />5) metal warehouse <br />approx. 1,098 sq.ft. X 10 centslsq.ft.= $ 110.00 <br />6) old house = $ LO 0 -.0 0 <br />TOTAL GROSS MONTHLY RENTAL INCOME .....................................$11,879.00 <br />1'; 12 months <br />TOTAL GROSS ANNUAL RENTAL INCOME ......................................$142,548.00 <br />less estimated expenses ........ 35 r,. 49,892.00) <br />taxes (7.5%) <br />insllrance(5;6) <br />management(5%) <br />maintenance (7.5 %) <br />vacancy allowance( 10%) <br />ANNUAL NET RENTAL INCOME .......................................$92,656.00 <br />Capitalizing $$92,656.00 @ a 9T6 cap rate indicaLes........... $b1,0*2"D,,5 i 1.00 <br />add market Yalue excess land ................................... 200,000.00 <br />VALUE INDICATED BY THE INCOME APPROACH: $1,229,51 1.00 <br />SAY $1,230,000.00 <br />9