Valuation Flashcards
Why is the Red Book important?
Promotes high standards set by RICS. It underpins the financial market and can provides formal bank valuations to influence the property market.
Are your void periods in the Office accommodation, Guildford, explicit or implicit?
Depends, when they is a short time until expiry they are explicit as they are specifically inputted in. When lease term is longer, they are implicit as they are reflected in the yield.
What rate do you apply on a basement/first floor?
A/20 for basements and first floor depends on how usable the space is but A/10 potentially.
How would you zone a return frontage unit? And zone a L shaped unit?
Add a percentage to the overall ITZA calculation (based on comparable evidence) for return frontage. For L shaped unit, apply zone B1 to the ‘hidden’ part of shop and apply A/3 rate.
How do you zone a retail unit? What would you do if there was a wall when you were halving back?
Zoning is a valuation technique used to compare retail units that are different sizes. To zone a shop, you need to take measurements every 6.1m deep to create zones and multiply each zone by its width. You then need to take a halving back approach based on the concept that the space becomes less valuable the further away from the frontage it is, and half each zone.
If there was a wall when halving back – check whether structural or cavity. If cavity, disregard it as new tenant may remove it.”
What is considered a good eaves height in an industrial building
8m minimum
What is considered a good site coverage?
40%
Why did you put a higher yield on the top slice in regards to the Office in the City of London
Because the top slice has smaller rental growth potential and a higher risk due to only getting that income at the beginning. You only apply a higher yield to the part of the passing rent which is over rented.
How do you work out the WAULT? (Weighted Average Unexpired Lease Term)
Add up the total contracted income between now and the expiry dates and divide by the total annual income
Why did you use the hardcore method for the office in the City of London and not the term and reversion approach?
I determined that the unit was overrented. The term and reversion method could not be used as I was applying a yield to the market rent and a yield to the overrented portion of the passing rent whereas the term and reversion method applied a yield to the passing rent and to the market rent. A higher froth rate was applied as the over rented portion had a higher risk due to only getting that income until lease expiry.
Did you value each unit separately or did you use a blended yield for Office in Guildford?
I valued each unit separately as there were significantly different tenant strengths that would not be reflected by a blended yield. Some of the units were arranged differently over multiple floors, for example, and therefore valuing them individually could reflect these varying levels of attractiveness more effectively. Valuing it separately also allowed for the scenario where an individual unit was sold off on a long leasehold.
What use class is a gym?
E class
How do you exercise professional scepticism?
Having a questioning mind that critically assesses all evidence that is used in a valuation to ensure it is accurate. Taking a step back and making sure the information you are provided with makes sense and can be relied upon.
What do you know about the Red Book supplement that has come out?
I haven’t had the chance to delve into the detail too much as the changes are not being implemented until May 2024. But some of the changes include: the introduction of a mandatory valuer rotation policy (5 years for individual/10 years for firm); sustainability matters should form a key part of the process with comment on potential future regulatory and investor costs; and statement must be made if value of site with alternative use is higher than that derived from DRC method.
What is a litigation purpose valuation?
When there is a legal dispute involving a property, a registered valuer may have to submit a report on the MV or MR of the property involved.
If your comparables are dated but there are no others, what would you do?
I could use modelling to bring the comparables up to date. I could use historic prices, forecasts and other research showing market movement to bring it up to date.
Why do you use a gross yield for residential properties?
As you do not know what the non-recoverable costs will be – so just looking at a gross income (not net).
What is the difference between a term of engagement and a terms of business?
A terms of engagement is specific to the instruction setting out scope, fee, timescale etc whereas the terms of business set out the overall business relationship between two parties and how to terminate it etc
