Valuation (level 2) Flashcards
What are 5 valuation methods:
- comparable
- investment- DCF
- contractors method/depreciated replacement cost
- Profit method- pubs/petrol stations
- residual method
How would I deal with a over-rented property
i would use the layer and hardcore investment method
can you explain when you would use Depreciated replacement cost
It may be used to value unique properties where there are limited comparables and also used for rating valuations of specialist properties.
- used for owner occupier properties
- accounts purposes for specialist props
- rating valuations of specialist props
What three things should I consider before a valuation
- Competence
- Conflict of interest
- Terms of engagement
What are the different steps involved in a valuation
- receive instruction
- check competence
- check for conflict
- issue terms of Engagement
- receive signed terms of engagement
- carry out research- title docs, leases, planning info and check for anything that may effect value
- inspect and measure property
- carry out valuation
- draft report
- get report check by other surveyor
- issue report to client
- issue invoice
- ensure your records are all up to date
Why should you carry out statutory due-diligence
To ensure there is nothing that effects the value of the asset you are valuing 1.check for site history 2.check asbestos register 3.check contamination 4.Flooding 5.EPC 6.Fire safety compliance 7 title - check boundary
When would you use the investment method
When there is an income stream
How is the investment method calculated
the rental income is capitalised to produce a capital value
What are the different types of investment method calculation
- conventional investment method- used when the passing rent is assumed to be the market rent (market rent *YP= market value)
- term and reversion- used when the passing rent is less than the market rent.
- Layer and hardcore method- used when the passing rent is more than the market rent.
What is a yield?
A measure of investment return
How would i calculate the yield ?
Income/Price (capital value) *100
How do I calculate YP
YP=100/yield
what should you consider when selecting a yield from comparable evidence
This should be considered carefully. RISK is a major factor when considering the yield in relationship to: quality of location quality of covenant use of property lease terms liquidity etc
What would I use an all risk yield for?
use in the valuation of a property let at market rent, reflecting all appropriate risks attached to that particular investment
Explain what a DCF is
A discounted cash flow is a form of investment method valuation. It is used value assets where cashflows are explicitly stated over a finite period of investment.
unlike other investment methods the explicitly identifies growth patterns instead of incorporating this in the ARY