Methods of Valuation Flashcards
What are the 5 steps to a Contractors Method of valuation?
- Estimated Replacement Cost (ERC) - inc. site works and rateable P&M
- Adjusted Replacement Cost - Adjust for age and obsolescence
- Value of Site - add land values?
- Decapitalisation - statutory decap rate 4.4% or 2.6%
- review - stand back and look
In short, what is the Contractors Method?
Assesses all the costs of providing a modern equivalent property, adding land and adjusting to reflect the age.
What is the Receipts and Expenditure method?
Gross receipts - Expenditure = Balance
Estimate gross profits and deducting all working expenses
What properties would be valued by Receipts and Expenditure?
Properties where comparable method cannot be used for income producing property such as:
- Hotels
- Pubs
- Petrol stations
- Golf courses (or other purpose-build sport facilities)
What’s the first step in the R&E method?
Establish the Fair Maintainable Operating Profit, that would be generated by a Reasonably Efficient Operator, derived from an assessment of the Fair Maintainable Turnover
When would you use the R&E method
When no comparable transactions are available and rental value is likely to be dictated by achievable profit.