Omaha daily bee., 1909-12-05
REAL ESTATE GOSSIP
Omaha Exchanges Series Of Addresses
Has Made Good Start
THOMAS ON FIGURING VALUES
Paper Read GivinE ThouEhtfuI In
structiOn On ~AsosrtaininE Cubi-
cal Contents and worth
Of Buildings.

The Omaha Real Estate exchange got off
with the right foot in respect to the series
Of addresses which are being given at the
weekly meetings. There has been no beat
ing about the bush by the speakers so far
and members OF the exchange have learned
many things. One OF the best OF the series
has been the talk by w. II. Thomas on
Methods of Ascertaining Cubical Contents
and Commercial Value Of Buildings" which
is given in full as follows:
There is an immense waste OF capital in
the buildings comprising the business dis
trict OF a city. II is found in badly de-
signed buildings, top-hesvy buildings, build
ings where severe shrinkage has occurred
in the ground value and the expensive
building constructed upon cheap ground.
In a residence district Il is found in the
expensive dwelling In an undesirable loca-
tion that is worth little more than the
cheap cottages surrounding II. Buildings
properly located, planned and constructed
may suffer from two causes, physical decay
and decline in net rents. 1 might enumerate
a number Of causes, but they would eventu-
ally lead to net rent, which we all admit
Is the basis OF value in real estate.
Richard NJ. Hurd. author of Principles
of City Land Values" states that "effec-
tive demand makes values. not Buildings"
A building is but a chattel or servant, a
medium through which the owner derives
a net income from the land. A majority OF
new buildings are properly planned and
located and yield the net income that their
localities entitle them. Others are properly
planned. but III adapted to their locations,
|, and are financially unsuccessful, while
others are more fsvorably located, but so
badly planned that their net rentals cover
Inc q norfoH ~ yaaro fail N Justify their
erection.
Problem Somewhat Complex.
To ascertain the value of buildings is an
interesting problem, since they differ in
age. design, character and quality of con-
struction. There are two methods for ascer-
tanning the value of buildings. One is to
capitalize net rents and deduct the value
of the land from the gross capitalized value.
The other Is to obtain the cubical contents
and ascertain the cost from current prices
OF labor and materials for each class Of
building at a certain value per cubic foot.
The unit of value per cubic foot that may
be determined upon as representative Of
the cost of various types Of buildings is the
result of experience.
The average frame house consisting OF
six to eight rooms costs from 10 cents to 10
cents per cubic foot, depending upon the
interior finish, system OF heating, quality
Of materials and workmanship; the better
class OF frame dwellings from IL to p cents
per cubic foot: store buildings. two to three
stories, ordinary construction, from u to l6
cents per cubic foot: five stories, tending to
Nfireproof, from 16 to % cents per cubic foot;
office buildings. steel construction, from 30
to 30 cents per cubic foot. BY the latter
method only the structural value of a new
building may be ascertained. That Of an
aIdar I,,iIdfpO n ba found nv dpdnctinR
physical depreciation from it's cost.
The percentage of depreciation per annum
in various buildings is as follows:
Per Cent.
Ordinary frame residence. ..........2 to 3
Cheap brick office buildings. 80 to-S
Higher class frame residences. ....,.1 TO
Higher class brick Fesidences....l to IA
Higher class store and office
steel constructed office buildings,
estimated n
Cheap frame workmen's cottages.4 to s
A further and serious depreciation may
occur from change in style, architecture
and new methods Of construction.
Ascertaining the cubicsl contents OF q
building is a simple problem when the di-
monsions are known. The first requisite
= then is to obtain the dimensions OF the
building. All estimates Of the cubicaI con
tents should be based upon accurate meas
urements Of the heighth and size of the ex.
act area covered by the building, after de,
Quoting air shafts. light wells or Other
openings that may be found.
In arriving at the actual net rentals from
property II is essential that all Of the ex
penses be deducted from the gross rentals
The expenses consist OF regular taxes, sv
erage cost of paving, insurance, repairs
water, heat, light. janitor service, elevator
collection of rents and an estimate to cove
possible vacancies, all OF which vary IL
different classes OF buildings.
The item OF repairs should not be under
estimated. All rental agents understan,
the tendency on the part OF owners o
property to underestimate the cost OF re
pairs. Unless all expenses are deducte,
from gross rentals net rents may be to,
high. Therefore, appraisements base,
thereon may be to a certain extent unre
liable.
would submit the following as repre-
senting the percentage Of expenses tina
may be charged against gross rents:
One. two and three-story
' retail ores.,........,. IA to % per cen
Wholesale bulldings,".",... 10 TO Is per cen
Apartments. n~on-elevator... 30 to 45 per cen
Apartments, elevator. .....,. 20 to IS per cen
Cttlce buildings. .-.......... 70 TO 80 per cen
Another important factor to be considere
is the capitalization rate, which is the rat
OF interest a community may be contente
with when investing In various classes O
property. High class property ~tustifies
lower capitalization rate than the cheape
and less desirable grades.