remaining economic life

remaining economic life

The number of years between the date of an appraisal and the date a property improvement will cease to have any economic value, even if it will still be structurally sound. A solidly built parking deck with short ceiling heights, narrow lanes, and tight turning radii might have a limited remaining economic life because most modern cars, particularly trucks and SUVs,cannot use the deck.

References in periodicals archive ?
The lease term (15 years) is not for a major part of the remaining economic life (40 years) of the office building.
As previously noted, the remaining economic life of the subject improvements was estimated to be between 20 and 30 years.
Based on the accrued depreciation of the subject property improvements, the remaining economic life for the subject improvements was estimated to be between 20 and 30 years.
However, book depreciation is computed using the property's remaining economic life.
One method of estimating this capitalization rate would be to calculate a sinking fund recapture rate (using the appropriate overall yield rate for improvements and the estimated remaining economic life of improvements) and adding this recapture rate to the overall yield rate for improvements.
One method of estimating this capitalization rate would be to calculate a sinking fund recapture rate (using the appropriate overall yield rate for the personal property and the estimated remaining economic life of the property) and adding this recapture rate to the overall yield rate for the personal property.
Once again, the overall yield rate (derived in consideration of the costs of debt and equity capital) and the average remaining economic life of the business assets should be primary considerations in estimating the appropriate overall capitalization rate for the business operation component.
Use of direct capitalization is debatable if remaining economic life is relatively short.
Such a five-year difference requires applying an upward adjustment of almost $2,000 to the comparable sale, with the exact amount varying with the discount or yield rate and the remaining economic life of the property.
Other elements also make profit margins difficult to predict: a high operating expense ratio or a low net income ratio; inconsistency in the owner's or manager's record-keeping regarding expenses; often a short remaining economic life, which tends to distort value indicators (especially the OAR).
A property with a 15-year remaining economic life will require a higher OAR than an otherwise similar building with a 25-year remaining life.
A major strength of the DCF method is an appraiser's ability to incorporate a property's estimated remaining economic life (for older projects) into the DCF's forecasted holding period.