The income approach to property valuation:
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
London
Routledge
2018
|
| Edition: | Seventh edition |
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | xxi, 386 Seiten Illustrationen |
| ISBN: | 9781138639621 9781138639638 |
Staff View
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Record in the Search Index
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|---|---|
| adam_text | Contents
Preface xiii
Acknowledgements xvii
List of acronyms xix
The global framework 1
Introduction 1
Understanding property as an investment asset class 2
Comparing property to other asset classes 4
An international framework 4
International standards 6
Summary 8
2 The local framework 10
Introduction IQ
The legal framework 12
Types of leases 13
Statutes affecting rights to let property 15
Planning or zoning 18
Impact of lease terms on value 18
Lease length 19
Rental terms 19
Repairing and insurance obligations 19
User restrictions 20
Alienation rights 20
Other considerations 20
Some examples 20
Summary 20
3 Fundamental financial concepts for the income approach 22
Introduction 22
The time value of money 22
The six functions of £1 23
vi Contents
Compounding 24
Discounting 28
Mortgages 39
The interrelationship of the functions 42
Nominal and effective rates of interest 42
Continuous compounding 44
Incomes in advance and non-annual incomes 45
Incomes receivable quarterly or monthly in advance 46
Present value of £ I pa dual rate (YP dual rate) 47
Dual rate adjusted for tax 47
Summary 48
Spreadsheet user 50
Project 1 50
Project 2 52
4 Fundamental methodologies for the income approach 53
Introduction 53
Income capitalisation 53
Discounted cash flow 56
Net present value 56
Internal rate of return 59
Comparative use of NPV and IRR 63
The income approach — DCF method 65
Basics of DCF 66
Summary 71
Spreadsheet user 71
Project 1 72
Project 2 73
Project 3 74
Questions: Chapters 3 and 4 74
5 Ethics, standards, practice and processes 76
Introduction 76
Registered valuers 78
Professional standards 78
Application of the RICS Valuation ֊ Global Standards or Red Book 79
Instructions 80
Basis of value 81
Valuation date 83
Valuation 83
Inspections, investigations and records 83
Inspections 85
Measurement 86
Condition 88
Planning 88
Contents vii
Legal 88
Risk 88
Records 89
Taxation 89
Capital Gains Tax 94
Value Added Tax 95
The valuation 95
The report 96
Summary 97
6 Market valuation: basic principles gg
Introduction 99
Valuation process 99
The sub-markets 102
Assessing principal income approach inputs 104
Comparison of market rent 104
Net operating income (net income for valuation purposes) 107
Landlords’ expenses 107
Insurance 107
Management 108
Taxes 108
Running expenses 109
Repairs 109
Essential works 110
Averages and percentages 110
Units of comparison 111
Overall analysis 111
Arithmetic zoning 112
Natural zoning 114
Analysing sale prices to find the price per square metre/foot 115
Factors affecting investor yield requirements and market capitalisation rates 116
Analysing sale prices to find the capitalisation rate or equivalent yield 116
Analysis to find the capitalisation rate 116
Analysis to find the equivalent yield 117
Deriving a discount rate 120
Adjusting comparables 120
Quality of the legal title 121
Quality of the lease(s) 121
Quality of the location 122
Quality of the building 122
Quality of the tenant(s) 123
Voids 124
Purchase expenses 124
Basics of the income approach 125
viii Contents
Income capitalisation or DCF 128
Summary 129
Questions 130
7 The income approach: freeholds 132
Introduction 132
The income approach 134
Capitalisation approaches 136
A fixed or level annuity 137
A ‘stepped’ annuity 140
Conventional treatment of outgoings 144
Allowing for voids 145
A falling annuity - over-rented property 148
A variable annuity 149
Discounted cash flow 156
Discounted cash flow and the over-rented property 157
Advance or arrears 158
UK statutory issues 160
A final adjustment 160
Practitioner s perspective 161
Summary 161
Spreadsheet user 162
Project 1 162
Project 2 164
8 The income approach: leaseholds 166
Introduction 166
Occupational leases 167
Investment leases 169
Medium to long term leaseholds at a fixed head rent 169
Fixed profit rent 170
Single rate analysis and valuation of leaseholds — leasehold capitalisation 171
DCF valuation of leaseholds 174
Practitioner s perspective 176
Summary 177 9
9 The valuation of commercial and residential property reflecting
UK landlord and tenant legislation 179
Introduction 179
Landlord and tenant negotiations 179
Premiums 179
Reverse premiums 182
Contents ix
Question 1: Premium 182
Future costs and receipts 183
Extensions and renewals of leases 185
Question 2: Surrender and renewal 190
Marriage value 190
Market rent, non-standard rent reviews, constant rent theory 195
Question 3: Non-standard rent review 196
Quarterly to monthly rent adjustment 197
Summaiy of landlord and tenant negotiations 198
UK statutory issues 199
Introduction 199
Business premises 199
Residential property 209
Mixed residential and business premises 216
Question 4: Landlord and tenant issues 217
Summaiy of UK statutory issues 217
10 Investment analysis
Introduction 219
Expected returns — the cash flow 221
The discount rate 222
Some simple analytical measures 224
initial yield 224
Yield on reversion 225
Equivalent yield 226
Reversionary potential 226
Performance measures 227
Income return 227
Capital return 227
Total return 227
Required return 227
IRR or expected return 227
Dealing with risk 228
The risk-adjusted discount rate 229
The sub-sector and property risk premium 229
The sector, or sub-sector, premium 229
The city (or location) premium 230
The property premium 230
Risk-adjusted cash flows: using sensitivity and simulation 231
Risk-adjusted valuations 236
Regression analysis 237
Questions 239
Spreadsheet user 239
219
x Contents
11 Development opportunities
Introduction 242
Incorporating a bigpicture approach 244
Garbage in — garbage out 246
A case study illustration 247
Professional frameworks and methodologies 248
The highest and best use methodology 249
The method 249
R1CS Valuation Information Paper No 12: The Valuation of Development
Land 250
RICS Financial Viability in Planning 2012 252
Applying the highest and best use in practice 254
I VS 2017 255
The residual method 25 7
Exploring the main inputs to a residual appraisal 25 7
Completed development value 257
Rent and yield 257
Incidental costs 258
Costs 258
Developer’s profit or risk 260
Sensitivity analysis 262
The needfor adoption of the cash flow approach 264
The cash flow approach explained 276
Viability studies 279
Practitioner s perspective 281
Summary 281
Spreadsheet user 282 12
12 Profits based valuations
The rationale behind the use of the profits method of valuation 287
Fair maintainable turnover 288
Gross profitability 289
Costs 289
Fair maintainable operating profit 289
Commentary on use of actual accounts 290
Freehold valuation and sales 290
Licensed property 290
Pubs 292
Valuation approach: public houses and bars 293
Comparables and market information 296
Valuation approach: late bars/clubs 297
Valuation approach: restaurants 299
Valuation approach: hotels 300
Contents xi
Valuing other types of property by the profits method 303
Cinemas and theatres 303
Care homes 303
Petrol filling stations 304
Golf courses 304
Racecourses, racetracks and stadia 304
Tenants improvements under the profits method 305
Summary 307
13 The historical development of the income approach 308
Introduction 308
Freeholds 308
Variable yields in a capitalisation 310
The modified or short-cut DCF 314
DCF and over-rented property 320
Lease changes 320
Processes and technology 321
Summary of the development of freehold income
capitalisation methods 321
Historic development of leasehold valuation methodology 322
Summary of leasehold valuation history 325
14 Contemporary issues for valuation practice 327
Introduction 327
Sustainability and its impact upon value 328
Productivity and its impact upon value 333
The application of mass computerised valuation and artificial intelligence 338
The need to be aware of local factors in a world of global standards 340
China 340
United Arab Emirates 343
Cyprus (and Greece) 345
The valuation of new complex and volatile cash flow property products 349
Co-working 351
What are co-working spaces? 351
How are co-working spaces priced and how do you value them? 352
Summary 353
Appendix A Illustrative investment property purchase report 355
Appendix B Illustrative development site appraisal report 351
Appendix C Solutions to questions set in text 353
Index 377
|
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| spelling | Baum, Andrew 1953- Verfasser (DE-588)17092338X aut The income approach to property valuation Andrew Baum, David Mackmin, and Nick Nunnington Seventh edition London Routledge 2018 xxi, 386 Seiten Illustrationen txt rdacontent n rdamedia nc rdacarrier Ejendomshandel Investering i fast ejendom Real estate investment - Great Britain Real property - Valuation - Great Britain Værdiansættelse Real property Valuation Great Britain Real estate investment Great Britain Unternehmensbewertung (DE-588)4078594-4 gnd rswk-swf Unternehmensbewertung (DE-588)4078594-4 s 1\p DE-604 Mackmin, David Verfasser aut Nunnington, Nick Verfasser aut Erscheint auch als Online-Ausgabe 978-1-315-63709-9 Digitalisierung UB Regensburg - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=030049317&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis 1\p cgwrk 20201028 DE-101 https://d-nb.info/provenance/plan#cgwrk |
| spellingShingle | Baum, Andrew 1953- Mackmin, David Nunnington, Nick The income approach to property valuation Ejendomshandel Investering i fast ejendom Real estate investment - Great Britain Real property - Valuation - Great Britain Værdiansættelse Real property Valuation Great Britain Real estate investment Great Britain Unternehmensbewertung (DE-588)4078594-4 gnd |
| subject_GND | (DE-588)4078594-4 |
| title | The income approach to property valuation |
| title_auth | The income approach to property valuation |
| title_exact_search | The income approach to property valuation |
| title_full | The income approach to property valuation Andrew Baum, David Mackmin, and Nick Nunnington |
| title_fullStr | The income approach to property valuation Andrew Baum, David Mackmin, and Nick Nunnington |
| title_full_unstemmed | The income approach to property valuation Andrew Baum, David Mackmin, and Nick Nunnington |
| title_short | The income approach to property valuation |
| title_sort | the income approach to property valuation |
| topic | Ejendomshandel Investering i fast ejendom Real estate investment - Great Britain Real property - Valuation - Great Britain Værdiansættelse Real property Valuation Great Britain Real estate investment Great Britain Unternehmensbewertung (DE-588)4078594-4 gnd |
| topic_facet | Ejendomshandel Investering i fast ejendom Real estate investment - Great Britain Real property - Valuation - Great Britain Værdiansættelse Real property Valuation Great Britain Real estate investment Great Britain Unternehmensbewertung |
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