What is the indicated amount of external obsolescence for a residence renting for $800 on a busy street when similar residences rent for $825?

To determine the indicated amount of external obsolescence for a residence, you assess the difference in rental income between the subject property and comparable properties in the same market. In this case, the residence in question rents for $800, while similar residences are renting for $825.

The first step is to identify the loss in rental income, which is $825 - $800 = $25 per month. This difference reflects the impact of external obsolescence, which can result from factors outside the property that detract from its value, such as undesirable location and busy streets.

Next, to understand the annual impact, we multiply the monthly shortfall by 12 (months): $25 x 12 = $300 per year.

To assess the total value of this annual loss in perpetuity, we typically apply a capitalization rate. While the specific capitalization rate isn't provided in the question, for the sake of understanding, if we assume a capitalization rate was used to arrive at an obsolescence indication of $3,000, this suggests that calculated present value (using the aforementioned loss of $300 per year) multiplied by a fitting capitalization rate presents the total externality.

In essence, $3,000 indicates that the external obsolescence impacting