Commercial Residential Or Commercial Property - The Brazoria County Appraisal District

Which Properties are Classified in Category F1, Real Residential Or Commercial Property - Commercial?


Category F1 residential or commercial property includes land and enhancements related to businesses that sell items or services to the basic public. Some examples of industrial services are: wholesale and retailers, shopping centers, office complex, restaurants, hotels and motels, filling station, parking lot and lots, auto dealerships, repair work shops, finance companies, insurance business, savings and loan associations, banks, cooperative credit union, clinics, nursing homes, medical facilities, marinas, bowling alleys, golf courses and mobile home parks.


Warehouses provide a special classification challenge because of the problem some appraisers have actually experienced in differentiating between industrial genuine residential or commercial property (Category F1) and industrial genuine residential or commercial property (Category F2). The main factor to consider is whether the storage facility is utilized as a part of the production process.


Warehouses that get goods from more than one maker or supplier to offer wholesale or retail ought to be categorized as Category F1, business genuine residential or commercial property The individual residential or commercial property should be classified as Category L1, commercial personal residential or commercial property.


Examples of warehouses that should be categorized as Category F1, commercial genuine residential or commercial property, consist of:


- A warehouse that buys completed clothing from numerous manufacturers and sells it to wholesale or retail outlets.
- A warehouse that runs mostly as a retail outlet.


Warehouses that provide storage as part of a production process should be categorized as industrial real residential or commercial property (Category F2). Industrial storage facilities are normally owned by the producer and are typically on or near the site of the production plant.


Examples of storage facilities that ought to be classified as Category F2, industrial genuine residential or commercial property, consist of:


- A storage facility that stores various kinds of fabric, products and supplies utilized by a production plant to manufacture clothing. The warehouse consisting of these items ensures the efficient operations of the production organization by offering an undisturbed supply of vital resources.
- A storage facility that just functions to receive the completed clothes from a manufacturing plant as it is made, and then disperses it to wholesale or retail outlets. This storage facility enables the factory to maintain a routine and effective production schedule by producing clothes even when there is no instant buyer.


It can not be overstated that individual residential or commercial property associated with either commercial genuine or commercial genuine residential or commercial properties ought to not be classified as either Category F1 or Category F2, but need to instead be classified as either Category L1 (industrial individual residential or commercial property) or Category L2 (commercial and production personal residential or commercial property).


Important Notes in Classifying Commercial Real Residential Or Commercial Property


- Include both the land and improvement worth. The land may be evaluated by the CAD and the enhancement by an appraisal firm. The total land and improvement value, however, is categorized as F1 residential or commercial property.
- Do not include industrial individual residential or commercial property as Category F1 residential or commercial property.


Category F1 Classification Questions


Q. An advancement company owns a 360-unit time-share condo complex. How should this residential or commercial property be classified?
A. This residential or commercial property is run as an industrial organization. The real residential or commercial property worth is categorized as Category F1 residential or commercial property. The individual residential or commercial property should be categorized as Category L1.


Q. Among our residents owns an organization and a nearby lot. Both the service and lot are utilized for business functions. Should the appraisal district classify the surrounding lot as an uninhabited lot under Category C or as business real residential or commercial property under Category F1?
A. The classification of any residential or commercial property depends upon its usage. Since the nearby lot is used in combination with a commercial business, it must be classified as Category F1.


Q. A telephone shop is owned and run as an independent operation by AT&T. The store offers and repair work telephones. How is this residential or commercial property classified?
A. Although an utility business owns this shop, it is run as a commercial service and is not a needed component of utility operations. Classify the residential or commercial property as Category F1 residential or commercial property.


Q. If a motel suite establishment, such as a motor inn, rents by the month, is it categorized as Category B residential or commercial property or F1 residential or commercial property?
A. The motor inn rents the units on a short-term basis. The residential or commercial property is classified as Category F1 residential or commercial property.


Q. A warehouse store chain purchases merchandise from numerous manufacturers for distribution to their company shops. Should their warehouse be categorized as Category F1 residential or commercial property?
A. Yes. The storage facility is not part of the production procedure When residential or commercial property is used for storing merchandise bought from more than one producer, which will be dispersed to retail outlets, it should be thought about commercial residential or commercial property.


Information taken, in part, from the 2013 Residential or commercial property Classification Guide published by the Residential or commercial property Tax Assistance Division (PTAD) of the Texas Comptroller of Public Accounts.


Overview of Commercial Approaches to Establishing Residential Or Commercial Property Value


Sales Comparison Approach


- Analyze sales of equivalent residential or commercial properties compared to subject residential or commercial property.
- Sales data: Sale studies, Marketing research business, Third party appraisals, Local media, Appraisal Review Board procedure.
- Comparables adjusted for sale conditions, land size, improvement size, age, condition, and location
- Come to indicated Sales Approach to Value


The sales contrast technique is used at residential or commercial property tax hearings for homes, land and owner-occupied structures. It is in some cases utilized for income residential or commercial properties as a secondary technique of appraisal. To perform the sales contrast technique you require info on other sales of residential or commercial property comparable to your residential or commercial property. You can obtain this info from a range of sources including the appraisal district's genuine estate appraisers, brokers and 3rd party suppliers. Inspect and picture the similar sales making comprehensive notes relating to distinctions in between the equivalent sales and your residential or commercial property. Then make modifications for distinctions in between the subject residential or commercial property and comparables. Adjust similar sales to the subject residential or commercial property. Select sales as similar as possible to the subject residential or commercial property to reduce modifications.


Income Approach


- Capitalization of Income
- Direct Capitalization
- Single year's net operating divided by market cap rate
- Market earnings data compared to subject residential or commercial property income information
- BCAD gathers and enters income data into database: Income and expense information, Rental information, Occupancy information, Secondary earnings data, Net operating Income information
- Capitalization rates estimated based on list price and net operating incomes
- Outside sources: Marketing research companies, Real estate publication
- Capitalization rates utilized for IMA Income Models
- Subject residential or commercial property income parts compared to market indicators
- Income Approach preferred technique for earnings producing residential or commercial property (Office, Apartment, Retail, Industrial)


The earnings method is generally used for income residential or commercial properties. The standard theory is that investors purchase earnings residential or commercial properties for the income stream they produce. This income stream can be transformed to an indication of market price for the residential or commercial property. The primary steps in the income approach are to estimate the potential gross earnings utilizing lease comparables and info regarding real earnings at the subject residential or commercial property. An allowance for vacancy is approximated based upon the efficiency of the subject residential or commercial property and average vacancy in the area. Operating costs are approximated using actual expenses at the subject residential or commercial property and market expenditures for comparable residential or commercial properties. The net operating income is computed by subtracting job and business expenses from the prospective gross earnings. Net operating income is transformed to an indication of market price by dividing it by the capitalization rate.


Cost Approach


- Calculates Replacement Cost New (RCN).
- Deducts Depreciation (LD).
- Uses Age-Life Tables.
- National Cost Publication Service.
- Market Data.
- Cost tables produce price per square foot.
- Land worth added to enhancement worth( RCNLD).
- Preferred technique for special usage residential or commercial properties, brand-new building and construction, restricted sales information, or minimal earnings information


The cost approach is not normally utilized at the ARB hearings except for new buildings. Appraisal districts often use the cost method for or commercial properties as much as two or 3 years old. After that, the sales comparison technique or earnings method depending on the kind of residential or commercial property is utilized. The appraisal district will apply the cost technique for a new residential or commercial property by including the marketplace value of the land (generally the purchase rate) to the building and construction expenses for the building. In addition, they might add an allowance for soft costs and for entrepreneurial revenue.