Valuation - Level 2 Flashcards
What is a desktop valuation?
A desktop valuation is an assessment of property value conducted without a physical inspection, often using existing data and reports.
Why was a desktop valuation chosen for the office building in Aldgate?
It was chosen because it was an update report to a previous valuation.
What are the limitations of a desktop valuation?
Main limitations include inability to physically inspect property condition, confirm current occupancy, or identify recent changes.
How did you communicate the limitations of the desktop valuation to the client?
The limitations were communicated in writing, explaining potential impacts on valuation accuracy and advising that the valuation is subject to these constraints.
How do you assess the strength of a tenant’s covenant?
By reviewing a Dun & Bradsheet credit report.
What factors are considered when evaluating the long unexpired term of a lease?
Factors include security of income, potential for rental growth, and tenant only break options.
What is the comparable method used for in property valuation?
It is used to value the property on a £ psf basis or capital psf basis to determine the appropriate Market Value.
How many comparable properties were analyzed for rental and yield evidence?
8 comparables for rental evidence and 4 for yield evidence.
What specific factors are considered in comparable evidence?
Factors include:
* Location
* Building quality and specification
* Size of the property
* Lease terms
* Date of transaction
What is Market Value as defined by RICS Valuation – Global Standards?
Market Value is the estimated amount for which an asset should exchange on the valuation date between a willing buyer and willing seller in an arms-length transaction.
What sections are included in the written report for a property valuation?
Main sections include:
* Executive Summary
* Property Description
* Market Overview
* Valuation Methodology
* Comparable Evidence
* Valuation Assumptions
* Valuation Conclusion
What is the Hardcore and Layer method in property valuation?
It is appropriate for properties with multiple income streams or when the current rent is below Market Rent.
How do yield fluctuations affect property market value?
As yields tighten, capital value increases; in a weaker market, rising yields lower capital value.
What market indicators may signal yield tightening or softening?
Indicators include interest rate movements, investor sentiment, and tenant demand.
What do purchaser costs include in property transactions?
Costs include:
* SDLT
* Agent Fees
* Legal Fees
* VAT
What are the SDLT pricing bands?
Pricing bands include:
* Up to £150,000 = 0%
* £150,001 to £250,000 = 2%
* Above £250,000 = 5%
What is WAULT?
Weighted Average Unexpired Lease Term, critical in determining investment yield.
How is WAULT calculated?
Multiply the remaining lease term by the annual rent for each tenant, sum these, and divide by total annual rent income.
What is a yield?
The rate of return on an investment, calculated by dividing annual rental income by property capital value.
How did you assess tenant covenants for capitalisation rates?
By reviewing tenant financial performance and creditworthiness using CreditSafe.
How did you gather and verify comparable evidence for the valuation?
Through property databases like CoStar and Egi, and discussions with local agents.
What factors did you consider when determining the appropriate capitalisation rate?
Factors include location, property quality, tenant covenant strength, and market conditions.
How did the tenant profile impact your valuation?
The low-risk nature of tenants positively impacted the valuation due to stable income.
How did you determine the appropriate letting voids and rent-free incentives for the vacant floor?
By consulting local agents on leasing trends.
How did you analyse the rental and sales evidence?
Using Hierarchy of Evidence principles and comparable features, locations, and terms.
What approach would you take if the property was under-rented?
Consider the Term and Reversion approach, valuing based on existing rental income and potential increase.
What is the impact of a leasehold interest on property valuation?
The valuation would decrease, especially with a short remaining term.
