The cost approach answers the question, "How much would the property cost to replace?" This method is often used to estimate the value of infrequently sold properties with specific purposes, like schools, churches, and government buildings.
Here’s the basics of how it’s calculated:
Find the cost of rebuilding the property.
Subtract the depreciation that’s accumulated since the property was built (accounting for concepts like “economic life” and “effective age”)
It’s not quite that simple, but the result should be in the neighborhood of your property’s approximate value.
Because these types of properties aren’t as common as homes and are rarely sold, there’s not as much data available to help flesh out a cost estimate. Again, appraiser expertise is key, so look for an appraiser with experience assessing special-purpose properties.