[mage lang="en|de|en" source="flickr"]residual income valuation approach[/mage]
Property Valuation: Process and Methods for Beginners
The most asked question is "What is it worth?"
The object in question can be almost anything, from an old painting, a car or a house. Whatever the object is always the answer is the same.
That it is worth what buyers will pay for it.
So, one way to get in the assessment of the property, is trying to sell the object. But it is impractical to sell something, to create just about its value, especially if the assessment is only for the purpose required Insurance.
A practical alternative is to ask an expert for opinion. Many companies and government institutions, experts, members advise the public about the value of her furniture, paintings, silver, and so on.
The same principle, the valuation of property is applied. A Chartered Surveyor's an expert in the value of the property, the vast experience and knowledge of the real estate market.
Chartered surveyors are instructed to value approaches for many purposes. These purposes can be obtained mortgages, Property rental values, insurance policies, discounts, and the mandatory assessments, and so on.
Valuierungsprozess
The assessment is said to be a decision-making process. Every guest is a problem, a valuation must identify and select applicable methods in the estimation of a specific and precise value.
Valuation is also a form of research, because Verifier collects the data systematically into the analysis required. Valuation process includes the following phases:
- Defining the problems of evaluation
- A plan
- Investigation / Surveys
- Collection of Data
- The analysis of the data 6th Reconciliation of value estimates
- Definition of the evaluation problem
The problem of evaluation must be from both the estate surveyor and the owner the owner or agent can be defined. The problems associated with the location of the property, the purpose of evaluation, date of valuation and date of submission of the report must well defined before the start of the assignment
2nd A plan
It has a definite plan for the development to the report. to do the scope, character and the amount of work have to exercise Valuer in a plan are determined. The questions, such as the types of real estate market, supply and demand factors to adopted the appropriate methods of assessment and sources of required data must be treated well.
3rd Investigation / Survey
The survey carried out includes inspection of the property to be assessed, so that measurements and tape noting the progress of repairs and the condition of the property. No structural Surveys are required by the estimator.
4th Collection of Data
Assessment data analysis will be collected, must be valid and authoritative. Asking prices are not evidence. The data collected must be reviewed continuously in order to reject the need for and ultimately accept the factual information
5th The analysis of the data
The collected data must be further examined and analyzed, resulting in at both the findings and conclusions of the ultimate.
6th Reconciliation of value estimates
The application of more than one analytical method to the verified data in value terms and values shown are not the same result. It is for the reviewer left to an individual Figure from the various indications of value derived develops the analysis.
Valuation
The five Methods of evaluation of Chartered Surveyors are used at below:
The first and most widely used method for property valuation is:
The first method of Investment
The investment valuation method is used for commercial properties. It is converting a flat Income (rents) in an appropriate capital. The capital value of a property is therefore directly related to their income producing power.
To the assessment of a property for investment purposes, the formula is:
Value = rent x years to acquire (abbreviated as YP)
The Years Purchase (YP) is a Multiplier that converts rental income into a capital sum. In a flat rent, it converts to create value.
2nd The comparison (or comparative) method
The comparison valuation method is used primarily for home ownership. The method applies to capital values. The purchases are usually not for investment purposes, but for the occupation by the owner. The direct comparison of capital values is crucial for the assessment of property used freely. Each inequality between the properties' capital values should be carefully considered, together with the advantages and disadvantages of each property in order to get a fair comparison.
3rd The cost method / Contractors Method
When properties change hands infrequently, their costs can be used to approximate its value.
The Value shall be made from the value of the property, together with the replacement value of the building. What is needed is not the cost of an exact duplicate of the existing Building, but the cost of providing the same accommodation in a similar form with up-to-date techniques.
The cost of the method of valuation of property requires that the potential buyer would be willing to pay the same amount for the premises, as elsewhere, he or she a similar property would cost to buy.
The basic approach for a contractor "method of valuation of property is:
Costs
plus
Cost of the building
Less
Depreciation
Obsolescence allowance
Equals
Value of the property
4th Profits Method
For certain Types of property is estimated the capital value carried from the set of trade or business secrets on the property. Hotels and restaurants offer examples, where in comparison to other properties is difficult because the value depends primarily on the capacity of earning capacity.
In these cases, the income method used to take 'gross earnings and then deduct the costs, provided the interest on the capital market by the tenant and the amount available for the tenant the Risk and businesses. The remaining amount is the amount that can be paid in rent. The estimated rental revenue can then at a reasonable rate of return by analyzing are sales of similar properties enabled.
The basic equation on which the profits method is based is as follows:
Gross earnings
less
Purchases
Gross profit
Less
Running costs (Excluding rent)
Equals
Net profit
The remaining 5 / Development Method
This method is used, if a property potential for development or redevelopment. Residual valuations for real estate are regularly made by people, residential property, that they believe could purchase be made more valuable if money for improvements and modernization have been issued.
The basic equation, which is based on the residual method, is as follows:
Value of the completed development
less
The total expenditure for improvement or development (including Developer's profit)
Equals
Value of the site or property in its present condition (residual value)
References.
Aluko, BT (1999): "Property Valuation: Concepts and Scope Definition. A lecture on M / S & Akintilo Co. Lagos, on the 15th May 1999. PP. 2 & 22-28.
Baum, A., (1978): "Residual evaluation: A Cash Flow Approach" Estate Gazettes "
Vol 247 PP. 973-976.
Bonbright, JC (1937): The valuation of real property in New York, McGraw Hill.
Millington, AF, (1988): On Introduction to Property Valuation, London, The Estate Gazette.
Richmond, D., (1985): Introduction in the evaluation, 2nd Edition, London, Macmillan.
RICS (1981): Guidelines for the evaluation of assets 2nd Edition, RICS London
About the Author
H. James is a Chartered Surveyor & a Lecturer of Real Estate Valuation/ Appraisal for about fifteen years. He is an author. H.J. has published three books on real estate appraisal and valuation.He could be contacted at tundesalaupaper@yahoo.co.uk for free copy of the books.
