Methods of Valuation

Question 1

Richmonds (1985) definition of the comparative method

Answer 1

compare it with similar properties for which transactions have already taken place

Question 2

heterogeneous properties

Answer 2

no two properties are the same, they having different housing styles and features, occupying different plots

Question 3

investment definition

Answer 3

laying out capital with the expectation of a return

Question 4

when the investment method is used

Answer 4

to value investment property

Question 5

when the profits method is used

Answer 5

to value trading entities (not commercial)

Question 6

divisible balance

Answer 6

represents the amount to be shared between the tenant (tenant’s share) and the landlord (rent, or rateable value), calculated by minusing the working expenses from gross profit (net profit)

Question 7

covenant strength

Answer 7

the financial strength of the tenant leasing a property - shows the ability to pay rent

Question 8

target cost

Answer 8

the expected selling price of the product minus the desired profit from selling it - a measure of how low costs need to be to make a certain profit.

Question 9

opportunity cost

Answer 9

benefit, profit, or value of something that must be given up to acquire or achieve something else - lose out by choosing the alternative