Docket No. 05-00359.001-C-3
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property, it is at a competitive disadvantage due to tenant
income restrictions. Nelson next deducted 5% or $32,244 for
vacancy as required by public act 093-0533 (35 ILCS 200/10-245),
resulting in an effective apartment income of $612,636. The
potential gross annual income and effective gross income amounts
were identical to figures contained in the appellant's appraisal
report. Nelson stabilized the subject's other income at $17,750
as reported by the owners from 2002 to 2004, increasing the
subject's effective gross income to $630,386.
Nelson next stabilized the subject's annual expenses at $280,181
or $2,919 per rental unit or 44.45% of the effective gross
income, based in part on the its reported expenses from 2002 to
2004, expense comparables, and market research. He placed more
weight on the expenses from 2002 and 2003 due to their stability
in those years with some modest increases. Nelson stated the
2004 expense figures appear to be an anomaly.
Nelson stabilized a management fee of 5% or $30,632 based on its
size, which is slightly higher than its historical management
fee. He testified a 5% fee is more consistent with his
professional experience. Nelson stabilized contract services at
$20,525, which was higher, but more consistent with the 2002
amount of $17,241. In 2003 and 2004 contract services were
reported to be $43,920 and $58,544, respectively. Nelson
testified the contract expenses of $43,920 and $58,544 in 2003
and 2004 were atypical for a highly dense property, indicating
there is not a lot of grass or open areas in need of care. The
appraiser also stabilized the subject's insurance premiums at
$19,200 or $200 per rental unit, considerably less than the
premiums paid from 2002 to 2004 of $44,594, $41,791, and $25,655.
Nelson testified he consulted insurance brokers and larger
property owners and found insurance premiums rarely, if ever,
exceed $200 per rental unit in the Quad Cities market. Nelson
noted insurance premiums vary depending on the type of insurance
and deduction levels. The appraiser next explained the
maintenance expenses reported by the owner ranged from $50,560 to
$68,896 or in excess of $700 per rental unit, which is
considerably higher than properties in the subject's market area.
Nelson determined maintenance expenses average between $500 and
$750 per rental unit, with higher expenses for older properties.
Given the subject's newer age, Nelson stabilized the subject's
maintenance expenses at $57,675 or $600 per rental unit. In the
reserves for replacement allowance, the appraiser calculated a
set aside amount of $19,200 or $200 per unit. However, this
amount was based on the likelihood of replacement during the
holding period. The length of the holding period was not defined.
Nelson reconciled the subject's reported expenses with six other
apartment complexes deemed to be located in the subject's market.
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