Such an appraisal is requested mainly owing to real estate tax assessment and condemnation. The individual states in the United States have different rules in this regard. However, most of them share the common themes of the Uniform Appraisal Standards for Federal Land Acquisitions.

The history and trends of casinos

I. Nelson Rose detailed the background and trends of casinos in his book Gambling and the Law. This book was originally published in 1986. In the book, he mentions that in the United States gambling is in its ‘third wave’. According to him, the first wave came during the period spanning the colonial period to the Civil War. This was the period of lotteries that were mostly influenced by the printing press.

The second wave occurred after the Civil War as a means to raise money for rebuilding by the South. The third wave began with the Great Depression when gambling was legalized in the state of Nevada. By 2015, commercial casino gaming was legalized by 22 states in the USA. The revenue generated from these casinos amounted to $38.3 billion at the time.

The casinos in the United States can be divided into four categories. They are commercial casino gaming, online casinos, limited stakes gaming, and tribal casinos. While the revenues from commercial casinos had been on the rise since 2009, the continued success was never guaranteed. The commercial casinos were faced with increased competition and ageing offerings in games and entertainment. 

With the onset of the COVID-19 pandemic, online casinos became immensely popular owing to lockdowns. As the casino players could not visit the land-based establishments, they turned to online casinos. Such casinos have great benefits for players, such as grand welcome bonuses and a large variety in games. For more information about online casinos, visit casinosjungle.com

The valuation of casinos

All the traditional methods used in the valuation of commercial properties are also useful in the valuation of casinos. They also involve certain obstacles that must be negotiated carefully by the appraiser. The comparable properties would be the sales of buildings that were used as casino establishments. Usually, the appraisers can arrive at a value through the income approach. 

They need not get into the business being conducted in the casino. Most of the time, there is a lack of substantial direct evidence of sale prices or property rents. This would lead anyone to conclude that the cost approach is most reliable for casinos. Depreciation is also a significant element in this process. 

The cost approach cannot always be put forward as a standalone method for valuing casinos. In most the cases, the appraiser must consider the total assets of the business. The sales and revenue derived from them are also considered. Based on these factors, the value of the casino can be derived.

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Among them is the current market price, availability of fewer comparable properties, and costs involved in maintaining the property. Besides, the question of how much the buyer is willing to pay always remains. Here, we’ve listed the methods that the appraisers use to determine the value of commercial properties:

1. Cost approach

The cost involved in rebuilding the structure from scratch is considered during the valuation. The current value of the land, the construction material, and other costs are also taken into consideration. Generally, the cost approach is used in the absence of appropriate comparable properties. 

Besides, certain properties may contain some specialized improvements. The cost approach is also applied when the value of the underlying land has been raised owing to upgraded structures.

2. Income capitalization

This method of valuation is primarily based on the income an investor can expect from the property. This can be derived partly by comparing the property with other similar properties in the area. It can also be derived from an expected decrease in the costs of maintenance. 

For instance, let us take an example of a building purchased for $1 million. Based on local market research, the expected yield from the building is 5%. This expected income of $50,000 every year can be enhanced by passing other associated costs to the tenant. It can also be enhanced by tightening inefficiencies.

3. Sales comparison

This method is also called the ‘market approach’. It relies heavily on the latest sales data of comparable properties. The appraiser seeks buildings with similar features that have been sold recently in the same market area. By comparing the properties, a fair market value is ascertained for the property in question. 

This method of valuation is typically used for residential property valuation. It can be difficult to find comparable properties when it comes to commercial real estate.

4. Value per door

This method of commercial property valuation is primarily used for apartment buildings rather than single-unit buildings. It determines the value of the entire building based on the number of units. For example, a building with 20 apartments priced at $4 million would be valued at $200,000 ‘per door’. This would be irrespective of the size of each unit.

5. Value per Gross Rent Multiplier

The Gross Rent Multiplier (GRM) is a valuation method that measures and compares a property’s potential valuation. This is done by taking the property’s cost and dividing it by the gross income. Let us understand this with an example. You have purchased a commercial property that is worth $500,000. 

It generates $70,000 every year in gross rents. In this case, your GRM would be 7.14 or 500,000/70,000. The GRM method is used to identify properties with a low price relative to their market-based potential income.

6. Cost per rentable square foot

Rentable square foot is the combination of usable square foot and the common areas tenants benefit from. They include elevators and stairwells. You can estimate the cost per rentable square foot using this method. You can also compare it to the average lease cost per square foot. The evaluation of the commercial property’s value is done based on these factors.

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Appraisals are primarily used to determine how much a particular property will sell in the current market. They are also of great importance in the underwriting process. Lenders generally look at how much an asset is worth before financing. So, they use appraisals to determine how much financing they can provide safely. An appraisal is also useful from the perspective of investing. 

Before investing in a property, you might want to know how much you should be paying for the asset. An appraisal also helps you after you have invested in the property. You can decide on the kind of investments you need in order to raise the value of your property.

Commercial property appraisal vs residential property appraisal

Although both commercial and residential properties may need appraisals, the processes used in them is different. The calculation of values in these properties differ in many ways. When it comes to residential properties, the appraisers determine values based on the selling prices of similar properties. Next, they add and subtract value according to the unique features and details of the property. 

In commercial properties, appraisals are done based on how much income the property can generate. Of course, there are other factors that are taken into consideration. The process of commercial property appraisals generally takes longer compared to the appraisals of residential properties. A major reason is the complexities involved in the process of commercial property appraisals. 

The similarities of residential properties make it much easier to determine their values by comparison. Commercial buildings are usually different from one another. The appraiser, therefore, takes more time figuring out how the different aspects of the property would affect its value. 

As commercial property appraisals are complex, they are much more expensive than residential property appraisals. The appraisal of a residential property typically costs a few hundred dollars. You would need a few thousand dollars in case of a commercial property appraisal.

Raising the value of a commercial property appraisal

Every owner of a property would always want to make the most of it. As an owner of a commercial property, you might be figuring out how to raise its appraisal value. In reality, appraisals are quite subjective. All certified appraisers would have different opinions on the properties’ appraised values. There are certain things you can do to increase the value of your commercial property appraisal.

A commercial appraiser would usually do their own research on a property. You might be asked to provide copies of important documents. They may include site plans, building plans, and current leases. You can speed up the process by keeping all the required documents ready in advance. Properties that are in excellent condition get higher appraisal values. 

So, make sure that your commercial property is well-maintained. If the building is older, make the necessary improvements. Income generated by the property is also taken into consideration by the appraiser. You can look for ways to generate more income from your property. Some of them are providing parking spaces for a fee or installing vending machines.

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