Valuation - Level 2 Residual Method Flashcards
1
Q
Can you talk me through your residual valuation
A
- In order to carry out my calculation I firstly calculated the sites gross development value
o This was done by analysing the market value
o X ARY (7%) - Once I had my GDV I then deducted my development cost:
o Which included:
Demolition costs
My build costs (BCIS – build rate adopted was £90 p.sm)
Professional fees (10%)
Marketing and agent costs
Finance costs (7% at the time of valuation, but this has increased to 8-9% - based on BOE rates)
Contingency - 10% - I also deducted the developers profit
o Which was 20% of GDV - This provided me with the Gross Acquisition Price.
- I then went on to deducted:
o additional agent and Legal Fees to let the property
o Along with LBTT - And this then provided me with the residual land value of £5,573,250
- Finally completed a sensitivity analysis
2
Q
What is a sensitivity analysis?
A
Used to calculate you’re the variance in your valuation should any of your costs change during the development.
3
Q
When using sensitivity analysis, what components would you flex and what range of spread would you consider?
A
- Construction Costs
- Timescales
- Minimum wage increases
- Rental prices/Sales prices
- 5 and 10% changes
4
Q
Can you tell me what LBTT stands for and the bands associated with it?
A
- Land and Buildings Transaction Tax
- The tax bands are:
o Anything up to £150,000 – 0%
o £150,001 - £250,000 – 1%
o Anything above £250,000 – 5%