Opinion ID: 1771952
Heading Depth: 1
Heading Rank: 5

Heading: Income Capitalization Approach

Text: In the income capitalization approach [7] the anticipated net income which the property is expected to generate over its usable life is capitalized and processed to indicate the capital investment which produces the net income. In this approach, more than either of the others, it is important to keep well in mind that it is the property that is being valued and assessed and not management. The Hinds County appraisers offered their opinion that the income approach indicates a value for Rebelwood at $3,978,780.00. The starting point for these appraisers was that the estimated net income as deduced from Rebelwood's operating statement for 1982  $437,665  was a representative figure and this amount of income would continue in the future. Taxpayer's appraisers began their income analysis with the assumption that Rebelwood was not a subsidized complex, eschewing the income figures from the operating statement in favor of a hypothetical income which Rebelwood could be expected to earn on the open market. In addition, Taxpayer's appraisers hypothesized that the vacancy rate would be greater  in the neighborhood of 5%. One appraiser explained the rationale for this adjustment: Right now it's very simple to keep it fully rented because the tenants are not paying their own rent. They are offered virtually free rent. It's very easy under those conditions to find people who want to move into these apartments. They keep a waiting list, a serious waiting list of people who are ready to move in just like that... . Now in the free world, when somebody moves out, what you've got to do is run ads in the paper, get people in, show it to them, persuade them to part with $280.00 a month to live there, and you run into a much higher vacancy that way than you do under one where somebody else is paying the man's rent. Using this postulated gross income figure, Taxpayer's appraisers found that the income capitalization approach indicates a value of $1,860,000.00.
After a two-day trial where the parties' experts offered widely conflicting evidence regarding the value of the property, the jury returned a finding that the true value of the property was $3,180,000.00. The Circuit Court on October 7, 1986, entered judgment in accordance with the verdict. Taxpayer now appeals to this Court and files nine assignments of error. In its brief, Taxpayer treats these assignments as directed to two essential issues: (1) The Circuit Court erred in instructing the jury to consider the value of any federal subsidy received by the taxpayer in determining a true value for the housing complex. (2) A valuation which considers the amount of federal subsidy received by the taxpayer violates the Uniformity and Equalization in Value Clause of the Mississippi Constitution and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Hinds County has cross-appealed, claiming that the determination of value rendered by the jury was not based upon any competent evidence in the record. We affirm on direct appeal and reverse and render on Hinds County's cross-appeal.