How do you calculate total economic life?

Calculating total economic life involves combining two important concepts: effective age and remaining economic life. Effective age represents the age of a property as it appears in terms of its condition and utility, often reflecting how well it has been maintained or updated. Remaining economic life, on the other hand, estimates how many years the property is expected to continue to be beneficial or valuable to its owner.

By adding effective age and remaining economic life, you arrive at the total economic life of the property. This sum gives a comprehensive view of the property’s longevity and sustainability in the market. A property with a high effective age but a substantial remaining economic life may still be a worthwhile investment, while a newer property with minimal remaining economic life might not be as desirable.

The other approaches listed—subtracting, multiplying, or dividing the effective age by remaining economic life—do not accurately reflect the cumulative understanding of a property's lifespan in economic terms and could lead to misleading assessments.