$2,426,000. The gross rental was $329,000, indicating that they were selling at seven times the gross rental. After the jumps began there were a series of jumps in the rentals of the apartments. Those we paid some little attention to, but we raised those apartments about 40 per cent, where the jumps in the rentals were about 60 per cent, and I judge some of those rentals will drop to nearly our basis of valuation. I have here a series of apartments that were examined as to their earning capacity, and I find that in about $10,000,000 of valuation, about 20 apartments, they had a rental of $1,500,000, an expense of $787,000, and net earnings of $725,000, or, on the assessed valuation, they were paying 7 per cent. If 2 per cent be allowed for depreciation that will only give you about 5 per cent as the real earning capacity of the apartment. I have here as a last illustration in regard to apartments, as a means of arriving at the potential earning of apartments, by working out its value and then working out its expenses, another tabulation. I found in most apartments where they had not come too close to the high-class property that the lot is worth about one-fifth of the value of the building. In other words, if the land value is $80,000, the building value $400,000, there is probably tied up with it a 20 per cent overhead, so that the total value of the building would be about $560,000. In the expenses there are about 10 items of expense that can not very well be sidetracked by the best sort of management. There are a certain number of tons of coal to be gotten; second, there is janitor help; third, elevator and telephone operators; fourth, current and light; fifth, taxes; sixth, insurance, about $2.50 per thousand; seventh; water rent; eighth, commission; ninth, repairs and papering, and tenth, miscellaneous, including loss of rent. When the expenses are worked out and the earning capacity worked out and the potential rental gotten, the two amounts that make up the potential rental are very nearly the same, that is, 50-50. In other words, about one-half the potential rental comes in the way of earning, without allowing any depreciation on the property at all. (The statements referred to are as follows:) Real-estate earnings-Comparative figures of sales, values, contents, and gross rents Mr. RICHARDS. As another illustration, I want to take up our handling of apartments, to show to what details some of these apartments are gone into. The office has lately made a special study of apartment costs, as to every kind of detail. I have here a sample of what it cost to build an apartment of 1,000,000 cubic feet in the year 1914, which was $200,000. The same apartment, thrown into details, and built in 1928, would have cost $370,000, or 80 per cent above. I have been asked in some cases whether we go by what is shown on the permits as to our valuations. I will say that we pay no attention to the permits, only in a general way, and for this reason. going to submit some cases here, which will illustrate that: I am In January, 1928, a permit was taken out for an apartment on lot 24 in square 1972. The number of cubic feet was 900,000, which at 45 cents per cube would be $405,000. A top figure would be $405,000, although the estimate given in the permit was $600,000. An apartment house built on lots 16 and 17 in square 1879 was begun in May, 1926, and finished in January, 1927. The estimate of cost given this office was $126,000. However, it has 430,000 cubic feet and cost a little over 49 cents a cube, or about $180,000. The estimate in the permit is $225,000. In square 168, at the southeast corner, an apartment was built in 1927. It has 11 stores and steam heat and outside finish of brick and stone, It cost about $800,000. The estimate for the building alone is $1,100,000 and sold in September, 1927, for less than its estimated cost. An apartment on Columbia Road, lot 37, square 2535, was begun in April, 1926, and contained 745,000 cubic feet and could not have cost over $350,000. The estimates in the permit is $500,000. An apartment on Fourteenth Street, lot 802, in square 2696, was built in 1925 and 1926 and contains 450,000 cubic feet. The estimate in the permit is $200,000, although it cost below this figure. In May, 1926, an apartment was started on lot 14, square 2940, and the estimate in the permit was given as $100,000. In 1928, it sold for $75,000. See appeal in this office. In October, 1926, a permit was taken out for an apartment on lots 46 and 57 to 61, in square 2971. The estimate in the permit was $160,000, although the land and building sold in 1928 for $117,000. See appeal. An apartment on lot 78, in square 197, gave an estimate in the permit of $154,000 and sold in 1925 for $124,600. In square 2541, lot 806, the estimate in the permit is for $307,000. The property was traded in 1926 and is for sale for $300,000. See appeal. În square 67, lot 801, an estimate in the permit is $100,000, while the land and improvements sold in 1927 for that amount. In square 2549, lot 856, a permit was taken out in August, 1925, for $150,000 and traded in 1926, and is now for sale for $125,000. See appeal. În the year 1918 or 1919, before things commenced to jump so much, I examined the sales then coming on of about 25 or 30 apartments. At that time we were assessing at two-thirds value. Those sales were in 1916, 1917, and 1918, before the jumps began. The total full value then indicated was $2,420,000, and the total sales $2,426,000. The gross rental was $329,000, indicating that they were selling at seven times the gross rental. After the jumps began there were a series of jumps in the rentals of the apartments. Those we paid some little attention to, but we raised those apartments about 40 per cent, where the jumps in the rentals were about 60 per cent, and I judge some of those rentals will drop to nearly our basis of valuation. I have here a series of apartments that were examined as to their earning capacity, and I find that in about $10,000,000 of valuation, about 20 apartments, they had a rental of $1,500,000, an expense of $787,000, and net earnings of $725,000, or, on the assessed valuation, they were paying 7 per cent. If 2 per cent be allowed for depreciation that will only give you about 5 per cent as the real earning capacity of the apartment. I have here as a last illustration in regard to apartments, as a means of arriving at the potential earning of apartments, by working out its value and then working out its expenses, another tabulation. I found in most apartments where they had not come too close to the high-class property that the lot is worth about one-fifth of the value of the building. In other words, if the land value is $80,000, the building value $400,000, there is probably tied up with it a 20 per cent overhead, so that the total value of the building would be about $560,000. In the expenses there are about 10 items of expense that can not very well be sidetracked by the best sort of management. There are a certain number of tons of coal to be gotten; second, there is janitor help; third, elevator and telephone operators; fourth, current and light; fifth, taxes; sixth, insurance, about $2.50 per thousand; seventh; water rent; eighth, commission; ninth, repairs and papering, and tenth, miscellaneous, including loss of rent. When the expenses are worked out and the earning capacity worked out and the potential rental gotten, the two amounts that make up the potential rental are very nearly the same, that is, 50-50. In other words, about one-half the potential rental comes in the way of earning, without allowing any depreciation on the property at all. (The statements referred to are as follows:) Real-estate earnings—Comparative figures of sales, values, contents, and gross rents Real-estate earnings-Comparative figures of sales, values, contents, and gross rents-Continued Rental represents gross amount per year. Value is obtained by adding 50 per cent to current assessment. Apartment house earnings and expenses, year 1929 A composite or average picture of the value of the expense of running and of the earning capacity of an apartment house having 1,000,000 cubic feet and 2 elevators, is shown below. Commissions, at 5 per cent on $70,000. Repairs and papering and painting, $12,000 divided by 4. Actual cost of an apartment of 5,000,000 cubic feet, year 1928 $2,590 2, 400 2, 400 1,800 10, 080 1, 200 600 3, 500 3,000 5, 000 32, 570 42, 400 74, 970 $5,000 1.000 6, 000 $12,000 115, 500 9,400 11, 900 1,300 3, 100 1, 300 142, 500 26, 000 Lumber and millwork. Mirrors and glass.. Carpenter's work.. Hardware and nails_ Bucks... Interior, standard construction: 4, 500 18, 000 4,000 3, 600 56, 100 |