Methods of Valuation Flashcards

1
Q

What are the 5 steps to a Contractors Method of valuation?

A
  1. Estimated Replacement Cost (ERC) - inc. site works and rateable P&M
  2. Adjusted Replacement Cost - Adjust for age and obsolescence
  3. Value of Site - add land values?
  4. Decapitalisation - statutory decap rate 4.4% or 2.6%
  5. review - stand back and look
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2
Q

In short, what is the Contractors Method?

A

Assesses all the costs of providing a modern equivalent property, adding land and adjusting to reflect the age.

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3
Q

What is the Receipts and Expenditure method?

A

Gross receipts - Expenditure = Balance

Estimate gross profits and deducting all working expenses

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4
Q

What properties would be valued by Receipts and Expenditure?

A

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)

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5
Q

What’s the first step in the R&E method?

A

Establish the Fair Maintainable Operating Profit, that would be generated by a Reasonably Efficient Operator, derived from an assessment of the Fair Maintainable Turnover

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6
Q

When would you use the R&E method

A

When no comparable transactions are available and rental value is likely to be dictated by achievable profit.

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