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Property Valuation

Last updated: July 11 2016
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  • Property Valuation

    "Value of a property is the present value of its anticipated income" - Do you agree? Yes or No, Why?
  • #2

    #2

    Re : Property Valuation

    Hello everyone!!
    I am still looking for an answer. Moderators and senior members please start having a good and healthy discussion over this topic. I have a lot of other things to be discussed here but firstly lets get done with this query.

    Regards.

    Comment

    • #3

      #3

      Re : Property Valuation

      Land beneath the structure appreciates over time.
      Quality of construction,inputs which go into construction also determines value of property.
      Ability to attract high rentals is also a factor which boosts value.
      Your approach is the Income approach to capitalise income.
      Other approaches are by discounting future cash flows at an appropriate discount rate and Direct capitalization (with an “overall” rate) for which you have to :
      Find value as a multiple of first year net income (NOI)
      “Multiplier” is obtained from sales of comparable properties.
      Let the discussion begin.
      Last edited October 20 2014, 10:56 AM.

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      • #4

        #4

        Re : Property Valuation

        Now it seems interesting. Thanks.

        Which method would you like to follow for Valuation of a property and Why?? Which one of these is more accurate and Why??

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        • #5

          #5

          Re : Property Valuation

          One method of valuation is the repayment option, which aims to repay the price of a property within 12-15 years, based on its income inflow. Therefore taking a property which has a rental income of Rs6000 per month, the value of the property would be calculated as 72000 based on this method.
          This is arrived at by:

          Monthly rent (6000) X 12 months = 7,2000
          Annual rent X 15 years = 108,0000

          This analysis can be further modified by taking into account taxes due, tax benefit,vacancy periods, repair costs or rental and capital increases over the time span involved.
          It all eventually depends on the rate of return one wants on an investment.

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          • #6

            #6

            Re : Property Valuation

            Sir,
            The above post is about Discounting Cash Flows I believe.
            And If you have to value a property, which method would you prefer, Discounting Cash Flows or Direct Capitalization?

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            • #7

              #7

              Re : Property Valuation

              This method is not DCF,but by taking into a/c rent likely to come.
              Estimating rental flow is not diffiicult.
              Direct capitalization and DCF analysis are each ok depends on circumstance.each appropriate in
              Particularly DC is good for those properties well situated/located and expected to have consistent NOI
              DCF analysis is well suited for properties expected for properties having varying NOI
              Direct capitalisation method is better,especially ifyou take the opportunity value of capital invested along with NOI.Capitalisation rate=Annual NOI/cost of property.e.g 120000( NET income after taxes,interest etc)/1800000(PRESENT Cost of property)
              PL TAKE OPPORTUNITY COST OF INVESTING RS18L TO REALISTIC FIGURE
              Last edited November 6 2014, 06:59 AM.

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              • #8

                #8

                Re : Property Valuation

                Thanks. That was helpful.

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                • #9

                  #9

                  Re : Property Valuation

                  ‘X’ , ‘Y’ and ‘Z’ owns G.F , F.F and S.F respectively in a three story house in South Delhi with common access rights to terrace , driveway and other common areas. But recently ‘Y’ constructed another floor (3rd) on top of the S.F entirely with its own cost.
                  1. Does ‘X’ and ‘Z’ has ownership right on the newly constructed 3rd Floor ?

                  2. How much ‘Y’ needs to pay to ‘X’ & ’Z’ to buy their rights in the newly constructed 3rd Floor ?
                  a. Does ‘Y’ pay ‘X’ & ‘Z’ , 1/3rd the value of entire 3rd Floor on the Market rate or Circle Rate minus the Construction cost borne by ‘Y’ ?
                  b. Or does ‘Y’ pay only for the terrace rights of ‘X’ and ‘Z’?

                  3. Now what happens to the terrace rights of ‘X’ , ‘Y’ and ‘Z’ above newly constructed 3rd Floor.

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