Property-Tax Valuation of Lodging Properties

Abstract

This article shows by way of a step-by-step hypothetical example that, for lodging properties, the income-capitalization approach produces the most supportable value estimate and should be given the greatest weight for hotel valuations. Under the income-capitalization approach, the appraiser uses a stabilized statement of income and expenses to make market-supported deductions for income attributed both to personal property and to the value of the business itself. Since an assessment for property taxes requires that only the real estate be considered, deductions can be made to exclude the value of the business and the FFE. By calculating the cost of capital one may derive first the adjusted overall capitalization rate and then the property-tax valuation.