Value of a studio building at your home

First post here. How do you appraise a home office and studio built separately on your property? Is there a rule of thumb, it has its own kitchenette, bath, entry, a little over 1,000 sq ft. Thanks

Hmm... call a real estate

agent...?

http://bayouline.com/o2.gif

Is this an existing building that you want "appraised", i.e. valued for purpose of sale?

 

I ask because I first wrote a response based upon a different interpretation.

 

WW

Hmm... call a real estate

agent...?

http://bayouline.com/o2.gif

The rules for appraising a home's value are to exclude buildings other than the home itself, nothing more. For example if your home were 1600 sq feet and your separate studio building had 1,000 sq ft you couldn't claim for mortgaging purposes that your home had 2600 sf. We're looking to find a way to value the studio. The appraiser says the studio is worth 10 per square foot, about the same as a barn, even though it cost 80k to build and has great business utility. Perhaps the only time it will be properly valued is when we sell.

Actually, mortgage refinance rates are low enough to be interesting. Unless with your current mortgage holder, appraisals are required, and every case in my experience has included all adjacent buildings with their own valuations. Another thought is what the insured value would be - your current insurance agent might be useful.

Is this an existing space that is already built?

 

Additionally, more information would be useful: specifically the type of photography uses; dimensions of the space including ceiling heights,

 

The OP reads as if there is a "kitchenette, bath," is within this intended studio structure - prima facie, yet depending upon the dimensions, a space 1000sq. ft. does not seem large enough to house: Photography Studio; Office, Kitchenette; and Bath - unless its purpose is for something like small product Photography or Headshots i.e. where the studio space itself might be something as small as 12ft x 15 ft.

 

WW

Sorry, had trouble posting specs in original post, had to shorten the original question. Space is 38'x24' with 16' ceilings, 2x6 framing, 6" wall insulation, 14" in ceiling, a 9'x12' exterior deck out a glass slider on second level which has an office space. Double oak doors 6' wide X 7'6" tall open to a lower level shooting area with a bath/shower and separate kitchenette.

 

The design allows camera placement to make full use of either the 24' or 30' wide x16 tall wall. Building is separate from home.. so your commute is a 30' walk. As for what was photographed... every kind of furniture, products or setups up to 18' wide, you can hang a camera directly overhead for large rugs and carpets, the interior open space has a tested white paint to get perfect 5500K using Sppedotrons bounced off the walls or any combination of softboxes.

 

No, it won't take a car, but it will take anything two men and a dolly can lift. The upper level areas have two drafting tables, a 44" wide printer, two computer stations, two desks and a sitting area. What irked me is the appraiser said no more than 3 out of 10 home shoppers would even want a space/office/studio like this so he called it a barn and won't budge on his value. Perhaps I'm wrongly assuming anyone would want to have such a space for a hundred different reasons from movie theatre man cave, to mail order business, to an open space within which one could make anything.

 

What's frustrating is, and the recent corona virus pandemic has shown, there's a huge value in having a home office.

Based on an issue I encountered years ago, I'd advise your checking on the definition of the building your city building inspector assigns. In my case there was no legal definition of a fixed gazebo on a cement slab, so in order to secure a building permit, my architect and attorney had to conform its placement and details to that of either a garage or a shed...in spite of my community having a gazebo bandshell sitting next to city hall and featured on their newsletter. That further complicated things for the real estate appraiser. In my area property appraisals are approximately 33% of fair market value. So, in spite of what you think the actual value is, taking into account its special features, I'd at least use the real estate appraiser's estimate as a starting guide. A salesperson can make a pig's ear into a silk purse at sales time, but in the meantime you do want to be fully insured against damage, loss, and liability.

Thanks for the feedback. Just my opinion, but zoning and appraisals have become much like photography judges who are constrained to thinking the only good landscape looks like Elliot Porter or Ansel Adams. Photography should be like a paintbrush in the hand of an artist, its not a recording instrument that comes with instructions and a rule book. And to extend the analogy past its useful life, zoning should be allowed so long as it doesn't harm or be dangerous to occupants and passerbys.

Thanks for the extra details.

 

From a business viewpoint, (i.e. the pricing of it, for the selling of it) any 'appraisal' by a real-estate agent or similar person or agent, is only an opinion.

 

From business experience, the value of the good or service from the Prospects' point of view will be much more significant in determining the opening price for negotiation. To this end, if it were mine to sell, I would be thinking outside its sale value only as a "photography studio with office kitchenette and bath".

 

However I glean from implication that this appraisal is for mortgage purposes? - though that's not explicit. In this case I see the Mortgage Broker as the "prospect" and your job is to sell the 'value' to him/her.

 

Additionally, my advice would be not to be "irked" by one, or any Appraiser's comments: being 'irked' or affected by any similar emotion, clouds best practice business judgement.

 

WW

Edited April 10, 2020 by William Michael

In Connecticut, the municipality that it's in would look at it as habitable space (which it is) and the municipality's appraiser would likely value it in the same fashion as the main house. This would guarantee a higher property tax, which if I were the assessor, I would strive to achieve. Any detached structure would show up on the municipality's records with an assigned value, which could be compared with the main structure's value on a per square foot basis. That said, you'll only know the true value of the property in the marketplace at the time it's placed there.

It would need an appraisal by a qualified appraiser I would think. One question I would have is whether it was or needed to be permitted by the local agency and would that effect a sale?

Value is in the eye of the beholder, unless you want to write it off on your taxes. In that case, you need an accountant or tax specialist. We used to write off a portion of our home as a business expense, as my wife used our study as an office and a dedicated room for a commercial enterprise. Basically, we were able to write off as a business expense the proportional costs of that space (loan principle payments). Again, consult with a tax specialist if your situation is more complex than TurboTax can handle. Rules change and we have not done this on our taxes for some years. If you're not looking for a tax write-off, then an appraisal is the way to go. You can hire one directly. You don't need to go through a mortgage company or realtor.

I have worked out of my home for consulting services, and I was able to take off some expenses. However, this is an extremely 'touchy' area with the tax people. It is usually necessary to have fairly rigorous separation from other domestic activities and, in the case of photography especially, from 'hobby' activities.

 

One measure, though not the only one, is whether the activities in the space devoted to the 'business' actually show a profit in the long-term. Only big corporations, as a rule, are allowed to show losses year after year :rolleyes:

 

You need professional help on this, and should accumulate literature from the tax people and from the library on this, not to mention the internet (though the latter is especially prone to "Sturgeon's Law")