Valuation Workbook: Using the COST_SIMPLE sheet - Cost Approach (Simple)

Table of Contents

1. What Is the Cost Approach – Simple?
2. Activating the Cost Approach – Simple
3. Setting Up the COST_SIMPLE Worksheet
4. Troubleshooting & FAQs

Prerequisites

1. Subscription Tier: Professional or Enterprise
2. An active appraisal file open in the Valuation Workbook
3. A completed initial setup on the HOME sheet, including Value Scenarios
4. You have cost estimates on a per-square-foot or per-unit basis (from cost comparables or builder interviews)

When to use it:

• As a feasibility check before or alongside other valuation approaches
• When cost support comes from builder interviews or market comparables rather than a formal cost service
• When a simplified cost opinion is appropriate for the scope of the assignment

When not to use it:

• When your engagement requires a detailed, line-item cost build-up (use a dedicated cost service instead)
• When the Cost Approach will be formally included in the Valuation Report and requires full Marshall Valuation Service support.

Step 2: Locate the Cost Approach module on the HOME sheet. In the dropdown, select Simple.

Step 3: Select the SET UP button. This activates and unhides the COST_SIMPLE worksheet.

Step 1: Configure the Lease-Up Option

If the subject property has stabilization risk or you need to account for lease-up costs, enable this section.

• Toggle the Lease-Up Option to include it.
• This unhides the Lease-Up Costs section below the table.
• Once visible, enter the following:
  • SF – the square footage subject to lease-up
  • Months – the estimated number of months of lost NOI during lease-up
  • Leasing Commissions – enter as a percentage
  • Tenant Improvements – enter the estimated TI amount

If lease-up is not applicable to your assignment, skip this step and leave the Lease-Up Option un-selected.

Step 2: Select the Number of Spaces (Areas)

• Use the Spaces dropdown to select the number of distinct space types you are costing (up to 10).
• For each space, enter:
  • Name – a label for the space (e.g., Office, Retail, Warehouse)
  • Area – the square footage or unit count for that space
  • Cost – the per-SF or per-unit cost estimate

Step 3: Set the Unit of Measure

Above the Cost Approach Summary table, select either SF (square feet) or Unit depending on how your cost estimates are expressed.

Step 4: Enter Indirect Costs and Entrepreneurial Incentive

• Enter percentage values for:
  • Indirect Costs – soft costs not captured in direct construction costs (e.g., architecture, permits, financing fees outside the loan section)
  • Entrepreneurial Incentive – profit/incentive margin for the developer or builder

Step 5: Calculate Construction Loan Fees & Interest

On the right side of the Summary table, use the following fields to calculate financing costs:

• Loan Interest – annual interest rate
• Loan Term – duration of the construction loan (in months)
• Points – loan origination points

The Valuation Workbook will calculate Construction Loan Fees & Interest based on these inputs and fold the result into your cost estimate.

Step 6: Review and Finalize the Indicated Value

• Review the Indicated Value calculated by the Summary table.
• To the right of the Indicated Value, use the available dropdowns to:
  • Apply any adjustments to the raw indicated value
  • Set your preferred rounding method
• Once finalized, assign the Indicated Value to one of the Value Scenarios configured on your HOME sheet.