Total Cost of Occupancy

Total Cost of Occupancy

Yesterday’s blog discussed methods of evaluating properties in locations where comparable sales are not available or highly inaccurate. One way to compare properties but not evaluate them is to determine the total costs of occupancy. This is a common method of decision making for commercial occupants of space. It is even used to make rent vs. own decisions.

The basic idea is to add all the costs of occupying a property. This could be rent or mortgage payment. If the property is purchased for cash, the cost of not having the money any longer would be evaluated or the purchase price could be amortized as if it had been loaned to a third party. To this would be added taxes, utilities, common area maintenance charges (in a multi-tenant situation) and or maintenance.

A commercial occupant would consider the costs of access to clients and access for employees. Someone looking at a vacation home would look at airfare and telephone costs of the different locations. When considering different cities employment costs must be taken into consideration. In many areas, a residence can not be left unattended. Servants may be needed to live in the property when the owner is away. In a rental, the costs of supervision or management and leasing must be considered. It is also a good idea for any budget to have a generous allocation for “miscellaneous expenses”.

After all of the costs of occupancy are totaled the properties can be compared. In a personal use property this is important; but non-quantifiable items may be just as important. Things like the quality of the environment or the neighbors or personal safety. Even items like the future of the country and possible changes in political, economic and climate conditions. The next blog will discuss winners and losers in climate change.




David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .