The term amenity value refers to the worth or pleasant feeling added by using or seeing something. The amenity value definition would be the value that an individual amenity adds to the property. But what is amenity value, and what is it used for?
An amenity value is a type of evaluation generally used to determine whether the amenity cost is worth the benefit it can bring. The term amenity value is used in two different ways by assessors. Either when natural resources are considered amenities or when investments are added to increase the property’s value. We’ll take each situation individually and explain them both in a moment but first, how does amenity value work for properties.
When we have a single-family home, every potential buyer will take a look at the list of amenities that the property has access to. These amenities can be public or private, and how the valuation of these amenities is done differs.
The most common use of amenity value is to determine the value of natural resources as they are, compared to their value if they are harvested. The amenity value added to residential developments by a virgin forest located nearby determines if the revenue is higher than the harvested timber’s value. When considering this, the valuation must take into account the fact that the forest’s value can decrease if it is harvested.
In this scenario, the forest has amenity value, meaning that it adds appeal for buyers or lenders. This appeal can impact the property’s market value. To determine a forest’s amenity value for a property, the assessor compares the value of that particular property to real estate comparables that do not have a forest nearby.
Amenity value in real estate is also applied to rentable, built, or differentiable amenities. Adding amenities to a property for the added value that they bring isn’t always simple. The more, the merrier concept can not be applied here because there is such a thing as too many amenities. Being somewhere in the middle, not too few, but not too many, should be considered reasonably safe for investment purposes. The real estate investor or seller should also look into preferred amenities for the property and its potential buyers.
For example, in an office building, amenities such as recreation rooms or rooftop lounges would positively impact the unit’s fee, but a pool might be useless. For residential properties, a theater room or pool would be a plus, while an escalator is useless. Public amenities for residential properties like a playground, school, or a forest also impact the HOA fees.