Valuation Flashcards
What is an external valuer?
people with no material links to the asset
What is an internal valuer?
somebody that values assets for internal purposes
How would you commence an instruction?
- Ensure competence
- Do conflicts of interest check
- Do Terms of Engagement.
What would you do if you were not competent for an instruction?
- Decline instruction.
-Refer to RICS find a surveyor website.
What would you check regarding conflicts of interest?
RICS professional statement on conflicts of interest
What would you check with the client before accepting the instruction?
- The purpose of the valuation.
- Does it need to be written, if so redbook.
-Agree liability cap on indemnity.
-Conflicts of interest.
What are the valuation standards?
RICS Valuation Global Standards (Redbook) effective Jan 2022 - APPLIES TO ALL VALUATIONS.
what is the UK supplement?
Global Standards 2017 -UK Supplement
What is the purpose of the redbook/ RICS Valuation Global Standards?
It sets out best practice, and provides uniformity for all valuations that are undertaken. To undertake a valuation the valuer must
- be competent
-issue terms of engagement
-Inspect and Investigate
-apple the Bases of Value
-meet mandatory reporting requirements
Does the redbook advise on how to value?
NO
Does the redbook advise on how to value?
NO
why do you undertake statutory due dilligence for valuations?
to ensure there is nothing that would materially alter the value of the property
what types of statutory due dilligence would you undertake?
- asbestos
-planning
-equality act
-tenure/ title checks
-epc
-flooding
-fire safety
what types of statutory due dilligence would you undertake?
- asbestos
-planning
-equality act
-tenure/ title checks
-epc
-flooding
-fire safety
how do you calculate wault
add up all the unexpired rent, and divide it by the sum one years rent
What are the five main methods of valuation?
Profits
Contractors
Comparable
Investment
Residual
What are the three main valuation approaches?
Milk INside COSTa
-market,- comparable evidence
-income, - converting cash flows
-cost, - a reference to the price of the asset
what RICS guidance is there on comparable evidence?
RICS Guidance note Comparable evidence in Real Estate Vals 2019
What is the hierarchy of comparable evidence?
OLRTSI
open market lettings
lease renewal
rent review
third party determination
sale and leaseback
why is a lease renewal better than a rent review?
Rent reviews are often upwards only
When would you use the investment method?
When there is an income stream to value
How would you undertake the investment method?
Rent capitalised at a yield (or multiplied by YP) growth is implicit.
Implicit growth means equal to rate of return.
what is a term and reversion valuation and when is it used?
term and reversion is used for assets that are underrented.
how would you do a term and reversion valuation?
I would gather investment comps to find a net initial yield, I would then capitalise the passing rent until the break using the initial yield.
I would then identify the market rent and adopt a reversionary yield, and then capitalise this into perpetuity.
what is an initial yield?
simple income yield for current income and price
what is a reversionary yield?
market rent divided by current price on an investment let below MR
when would you use the investment method?
when there is an income stream to value
how would you value an overrented asset?
hardcore and layer method
when would you use the profits method?
when the value of the asset is in the business
when would you use contractors/ DRC?
when would you use residual?
how does a residual differ from dev appraisal?
when would you use comparble?
what would you consider when gathering comps?
Size, location, date, spec,
can you tell me what you understand by market value?
what is the purpose of the UK supplement?
It provides specific requirements of undertaking a UK valuation.
can you tell me about the comparable method?
it is embedded in the other methods of valuation
What is VPS 1
Terms of engagement
What is VPS 2
Inspections, investigations, and records
VPS 3?
Valuation reports
what is VPS 4?
Bases of value
what is VPS 5?
Valuation approaches and methods
what is the difference between headline and net effective rent?
headline rent discounts incentives, net effective rent is the REAL MARKET RENT
What is the hope value of land?
This is the value of the land with the expectation that you will get planning permission on it.
what is the marriage value?
this is the value of two assets that arises from the merger of the two of them
Can you tell me about the structure of the redbook?
Part 1 - Intro
Part 2 - Glossary
Part 3 - Valuation Pro Standards
VPS 1- TOE
VPS 2- INSPECTION
VPS 3- Valuation report contents
VPS 4- Bases of assumption
VPS 5 - Methods of valuing
what is initial yield?
income/ price
difference between synergistic value and marriage value
REDBOOK DEFINED TERMS
marriage value, difference in two assets when combined compared to alone.
synergistic value - when two assets are with more together than alone.
What is an arms length transaction?
when there is no interest between the parties
what is proper marketing
appropriate length of time per property, no set time frame
what is a special assumption
presume the facts are different to what they actually are.
re Vacant possession, and planning
equated yield?
IRR with growth of property investment
Can you talk me through this specific example?
you mention VPS 4, what is that?
