COURSE DESCRIPTION

This 14-hour course provides intermediate-level Michigan assessors and real estate appraisers with a rigorous, applied understanding of the mathematical foundations underlying the income approach to value, as used in both fee appraisal and ad valorem assessment of commercial real estate. The course is built around five integrated content modules, each reinforced by hands-on, interactive spreadsheet-based and slide-based exercises that allow participants to manipulate inputs and observe real-time changes in calculated outputs.

Participants will progress from foundational income approach mechanics (Potential Gross Income through Net Operating Income and direct capitalization) through the mathematics of compound interest (the Six Functions of $1), income pattern analysis and present value theory, cap rate derivation models (including the Band of Investment/Akerson technique and the Gordon Growth Model), and conclude with a full discounted cash flow (DCF) and internal rate of return (IRR) analysis incorporating mortgage debt, leverage, and reversion.

Emphasis throughout is placed on the practical application of these mathematical tools to real-world commercial appraisal and assessment problems encountered by Michigan assessors, including the derivation and support of capitalization rates for assessment appeals, the Michigan Tax Tribunal, and board of review proceedings. The course assumes participants already possess foundational income-approach knowledge and is calibrated to an intermediate skill level — it is not an introductory course.

Each of the five content modules (chapters) is allotted equal instructional time. The course includes a comprehensive 20-question final examination requiring a minimum score of 70% (14 of 20 questions correct) to receive CE credit.

LEARNING OBJECTIVES

Upon successful completion of this course, participants will be able to:

1. Construct a complete income approach value indication, correctly sequencing Potential Gross Income, vacancy and collection loss, miscellaneous income, Effective Gross Income, operating expenses, and Net Operating Income, and apply direct capitalization to derive an indicated value.

2. Identify, calculate, and correctly apply each of the Six Functions of $1 (Future Worth of $1, Future Worth of $1 Per Period, Sinking Fund Factor, Present Worth of $1, Present Worth of $1 Per Period, and Installment to Amortize $1) to compound interest problems involving varying compounding frequencies.

3. Distinguish between level, growing, and declining income patterns and correctly select and apply the appropriate present value technique — including direct capitalization, the Gordon Growth Model, and explicit year-by-year discounting — to each pattern.

4. Derive an overall capitalization rate using the Band of Investment (Akerson) technique and the Gordon Growth Model, and calculate the effective tax rate and its impact on derived cap rates.

5. Construct a multi-year discounted cash flow analysis incorporating mortgage financing, calculate before-tax cash flow and net reversion proceeds, solve for internal rate of return (IRR), and evaluate positive versus negative financial leverage.

6. Apply all of the above techniques to support capitalization rate conclusions in Michigan assessment appeal and Tax Tribunal contexts.