Commercial FAQ

  What is commercial real property?

For tax purposes, commercial property has a highest-and-best use other than residential use.  Some examples are:  Retail stores, restaurants, offices, warehouses, industrial parks, apartment buildings and marinas.


  What if I don't rent out my building?

We calibrate our models using market rates. In other words, we analyze a sample of rent, vacancy, and expenses rates from leased properties and select typical market rates for our models. Whether you produce rental income or not, we use the same model.


  How do you deal with excess land?

Excess land doesn't directly contribute to the income stream. Therefore, we estimate its value and add it to the income approach.


  Do you use the income approach on all commercial buildings?

We model the income approach for almost all commercial properties in Kitsap County. However, some properties, like golf courses do not lend themselves to the income approach because we don't have access to enough market data to calibrate the model.  Therefore, other times we use the sales comparison approach, on convenience stores with gas; for example, if we have sufficient sales of similar properties.


  Why does my value change annually?

Your assessment may change as a result of a value update. Every year we compare sale prices to assessments. If assessments are significantly different from sale prices, we will apply a value update factor to that group of properties as a means to bring the assessments closer to sales prices.


  What if I disagree with my valuation?

We encourage you to contact us and we will review your account information with you to ensure accuracy.  If the assessed value is still disputed, you have 60 days from the date on your personal property assessment notice to appeal the value to the County Board of Equalization.


  Is machinery and equipment real or personal commercial property?

Machinery and equipment is typically considered "real property" when affixed to the property.  There may be situations however when machinery and equipment are considered personal property.  Whether machinery and equipment is classed as real or personal property the assessment standard is still "market value" and the tax rates applicable are the same regardless of being classed real or personal property.  The primary characteristic of personal property is its mobility.  It can include machinery, equipment, supplies, and furniture.


  What are the key components of the income approach?

*Potential gross income (PGI)

*Annual income at market rents and 100% occupancy

*Vacancy and collection loss

*Percent of PGI lost due to vacancies and bad debt

*Effective gross income (EGI)

*Annual rent collected

*Operating expenses

*Percent of EGI used for administration, repairs, utilities, insurance, and property taxes

*Net operating income (NOI)

*Annual income remaining after operating expenses are paid

*Capitalization rate

*The ratio of NOI to value or sale price


  What does the income approach look like?

An example of a value estimate using the income approach:

 Model CoefficientModel Calculation
Building typeRestaurant 
Comparison unitSquare feet    
Building size2,500 
Estimated rent/sqft $10 
Potential gross income$25,000 
Vacancy & collection loss5%-$1,250
Effective gross income    $23,750
Operating expenses   20%-$4,750
Net operating income    $19,000
Capitalized value  8%