Conventional Valuation Methods and their application - Module 2 Flashcards
Name the conventional methods of valuation?
- Comparable Method
- Investment Method
- Residual
- Profits/Accounts Method
- Contractors/DRC Method
What are contemporary valuation methods?
Discounted Cash Flow Methods
What makes a property transaction comparable to the property being valued?
Similarities such as:
Physical
Location
Time scale
Use
Tenure
How many comparables are needed to produce a valuation?
As many as it takes to arrive at the value.
What is the longest time period before a valuation date that a transaction could be accepted as being comparable?
It depends upon the property, location and market conditions at the time.
Static market maybe 4 years ago.
A changing market maybe 6 months.
What do you understand by the expression weighting of comparabel evidence?
We attach the greatest weight to those comparisions which have the greatest similarity to the subject property.
What do you understand by the expression hierarchy of evidence?
The heirarchy of evidence by transaction type for commercial.
Open market lettings
Lease renewals
Rent reviews
Independent expert’s determination
Arbitrator’s awards
What is interpolation of comparable evidence?
Working between two extreme points with the lowest possible value and highest possible value.
We then work down from the top and up from the bottom.
Considered statisticaly safe.
What is extrapolation of comparable evidence?
Extrapolation is working outside of the known points.
It is considered statistically dangerous.
What is the purpose of Zoning?
Is that we can analyse and value retail units adding different frontage to depth ratios.
What is the standard Zone depth?
6.1m or 20ft in UK
How would you arrive at the Market Rent of the first floor of a retail unit?
If used as retail purposes take X as Zone A divided by 10.
If not used as retail and used as storage etc take a rate per sq ft independant of X by comparison of other upper floor rents.
How would you arrive at the Market Rent of a retail unit with a return frontage?
You would make an uplift to the Zone rates.
So if extends to zone A then an uplift to Zone A and Zone B etc etc.
If half of Zone B then half the number of Zone B
How would you value a shop unit for rent review with frontages on two roads i.e. it is a through unit?
You would Zone back from both frontages.
How would you determine the Market Value of an investment property let on internal repairing terms?
Assuming let at Market Rent we would need to deduct the outgoings for
External Repairs
Insurance
Management
This leaves the Net Income which we then Capitalise at the appropriate yield.