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
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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.

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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
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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%
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