Calculation of the value of the property using the DCF method is carried out according to the formula:
where V is the current value of the property;
CF j is the cash flow of the period of the j-th year;
r is the discount rate;
Vterm is the value of the subsequent sale (reversion) at the end of the forecast period;
P– duration of the forecast period, years.
1. Definition of the forecast period.
2. Forecasting values cash flows from the property for each forecast year.
3. Calculation of the cost of reversion.
4. Calculation of the discount rate
5. Determining the value of the property
The duration of the forecast period is determined by the duration of the stage of unstable cash flows of the property being valued.
In international valuation practice, the average forecast period is 5-10 years; in Russian practice, a typical forecast period is a period of 3-5 years.
The calculation of different levels of income from a property can be represented by the formulas:
PVD = Area ٠ Rental rate (4.28)
DIA = DIA – Unemployment and Rent Collection Losses + Other Income (4.29)
CHOD = RDD – Real estate owner operating expenses related to real estate (4.30)
In practice, Russian appraisers calculate the net cash flows of a property without taking into account the specifics of financing, i.e. the DCF method discounts net operating income.
When evaluating the market value of a property, the cash flow is the net operating income from the property.
However, if it is necessary to estimate the investment value of a property or value under existing use, then the actual costs of the owner or investor must be taken into account, therefore, the following levels of cash flows are used:
Cash Flow Before Taxes = NPV - Capital Investment - Loan Servicing + Growing Loans. (4.31)
Cash flow for real estate after taxes =
Cash Flow Before Taxes - Payments income tax property owner. (4.32)
Land tax and property tax must be deducted from the actual gross income as part of operating expenses.
Economic and tax depreciation is not a real cash payment, so depreciation is not part of the owner's operating expenses.
Capital investments made to maintain the subject property must be deducted from net operating income as part of operating expenses.
Loan servicing payments (interest payments and debt repayment) must be deducted from net operating income if the investment value of the object (for a particular investor) is assessed.
The reversion is the value of the future sale of the property at the end of the forecast period.
If we consider the investor's cash flows for a real estate object, then at first the investor invests in the object, then receives income from the object and, at the end of ownership, sells the object, i.e. receives a reversion of the original investment.
When calculating the reversion, the appraiser needs to determine the value of the property at the end of the forecast period.
1) a comparative approach, in this case, the appraiser determines the price of the future sale, based on an analysis of the current state of the market, from monitoring the cost of similar objects and assumptions regarding the future state of the object and the future state of the real estate market;
2) income approach, in this case, the appraiser, based on the assumption that the real estate object will have constant stable cash flows by the end of the forecast period, uses the income capitalization method for the year following the year of the end of the forecast period, using a self-calculated capitalization rate;
3) cost approach, in this case, the appraiser calculates the cost of the subsequent sale as the sum of the predicted value market value land plot and the cost of reproduction (or replacement) of the assessed object at the end of the forecast period;
4) assumptions regarding changes in the value of the property during the forecast period.
Discount rate is the rate used to convert future earnings into present value. Quantitatively, it is equal to the rate of return, the value of which depends on the risk associated with the object being evaluated.
The methods for calculating the discount rate are as follows:
1) Capital asset valuation model;
2) Method of market extraction;
3) The method of cumulative construction.
Capital asset valuation model. The capital asset valuation model is practically not used to calculate the discount rate in real estate valuation.
Market extraction method. The market extraction method involves estimating the discount rate based on an analysis of the actual return received by investors when investing in similar real estate. This method allows you to most objectively assess the risks and calculate the rate of return for real estate, however, its application requires obtaining reliable information on comparable properties.
In this thesis project, we use the cumulative construction method to determine the discount rate.
The cumulative construction method determines the value of the discount rate by successively cumulating (adding) premiums for the risks identified on the object being evaluated. The method of cumulative construction is universal and is used to evaluate various objects of property. However, the composition of the awards is individual. For real estate, premiums are calculated for the risk of investing in the property being valued, the level of liquidity, and investment management.
R n \u003d R b / r + P 1 + P 2 + P 3 + P 4
where R b / r - risk-free (base) rate of return;
P 1 - country risk;
P 2 - premium for low liquidity;
P 3 - premium for the risk of investing in the assessed object;
P 4 - award for investment management.
The risk-free rate of return is the rate of return on risk-free investment instruments that meet the requirements of reliability, liquidity and availability.
The concept of a risk-free rate of return was introduced into investment analysis by W. Sharp as the most acceptable type of base rate of return with which the return on any type of investment can be compared. Thus, for valuation purposes, the concept of the base rate of return as the minimum guaranteed rate of return at the valuation date is more important.
In this thesis project, we accept the risk-free rate in accordance with the average bank rate on deposits for 1 year in the city of Vologda. The data are summarized in Table 5.1.
Table 5.1
Country risk - reflects the uncertainty of future income streams due to the possibility of changes in the political or economic structure of the country. Russia is the country with the highest risk. The measure of country risk is considered to be the credit rating of the country, it is the same for all companies. The country risk is 5%.
The premium for the risk of investing in the property being valued. The premium for the risk of investing in specific real estate takes into account possible changes in the value of the object in the future, due to the loss of consumer properties.
1. Expert method. In this method, the premium is usually in the range of 0-5%.
2. The method of weighted risk assessment. The weighted assessment method divides risks into systematic and non-systematic, as well as static and dynamic.
In our case, we use the weighted risk assessment method for the calculation.
Calculation of the amount of risks is presented in Table 5.2.
Table 5.2
|
Type and name |
Risk premium, % |
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|
Systematic risk |
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|
Deterioration of the general economic situation |
dynamic |
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|
Increasing the number of competing properties |
dynamic |
||||
|
Change in federal or local law |
dynamic |
||||
|
Unsystematic risk |
|||||
|
Accelerated building wear |
static |
||||
|
Shortfall rental payments |
dynamic |
||||
|
Ineffective management |
dynamic |
||||
|
Criminogenic factors |
dynamic |
||||
|
Wrong execution of contracts |
dynamic |
||||
|
Natural and emergency anthropogenic situations |
static |
||||
|
Number of observations |
|||||
|
Weighted Total |
|||||
|
Number of factors |
|||||
|
Final Risk Ratio |
Premium for low liquidity. The calculation of the premium for low liquidity is based on the determination of the investor's loss of profitability during the exposure period of the property being valued. The typical exposition period of an object is the period of time from putting the object up for sale until receipt Money for the property sold, whether the typical period of time required for the property to be sold on the open and competitive market subject to all market conditions.
P liquid \u003d R b / r * q / 12
where P liquid - adjustment for low liquidity;
R b/r - risk-free (basic) rate of return;
q is the typical exposure time for the evaluated object.
In our case, the liquidity adjustment will be:
P liquid \u003d 10.44 3/12 \u003d 2.61
Investment Management Award. The value of this premium in the vast majority of reports is calculated by experts based on risk ranking on a five-point scale:
Low value - 1%;
Value below average - 2%;
Average value - 3%;
Value above average - 4%;
· High value - 5%.
The amount of the premium is determined by the complexity of managing the object, the availability of personnel reserves of professional managers and the real possibility of the investment manager influencing the profitability of the object.
Since the object being valued is a commercial property that is in demand, the sale of which does not require a long time and additional marketing costs, therefore, the premium for investment management can be taken at a rate of 2%.
The capitalization ratio is interest rate, which is used to convert annual income into cost. The capitalization ratio includes the investor's rate of return on invested capital and the rate of return on capital.
K n \u003d R n + N VK
where K n - capitalization coefficient for real estate;
R n - the investor's rate of return on invested capital;
N V.K. - rate of return of capital.
The rate of return on capital is the rate of interest that provides a return on the initial investment. This component of the capitalization ratio allows in the process investment analysis divide the annual income generated by real estate into two components:
1) compensation of capital invested in real estate;
2) receiving additional income from owning the object.
In valuation practice, three methods are used to calculate the rate of return on capital:
1) the Ring method (assumes a linear return on capital invested in real estate. In this case, the return of capital does not imply its subsequent reinvestment to generate income. Usually, the Ring method is used when evaluating objects that are in the last phase of economic life. Such real estate is characterized by the direction of recoverable amounts to object maintenance);
2) the Inwood method (assumes a uniform annuity return of capital invested in real estate. The use of the Inwood method is advisable for objects that have not exhausted their economic life, provided that the rate of return calculated for real estate corresponds to the market investment climate);
3) the Hoskold method (as well as the Inwood method, it involves the reinvestment of initial investments reimbursed from the annual income from real estate, however, in this case, a risk-free rate of return is used. The use of this method is advisable if the object has not exhausted its economic life, but rate of return that takes into account investment risks real estate does not meet market expectations).
According to experts, the straight-line return of capital (Ring's method) best meets the conditions for investing in Russia.
Calculate the annual rate of return on capital using the formula:
R cap \u003d 1 / VF - HV
where R cap - the rate of return of capital;
FZh - physical life according to the capital of the building;
HF - chronological age of the building.
R cap \u003d 1/100 - 0 \u003d 0.9%
Capital group of the assessed object II, the physical life of the building is 125 years. Since the building is under construction, the rounded return on capital will be 1%.
Thus, the discount rate calculated by the cumulative construction method and the capitalization ratio will be:
Table 5.3
The reversion cost is the value of the object at the end of the last forecast year. The need to calculate the reversion cost is due to the discrepancy between the duration of the forecast period used in the discounted cash flow method and the residual economic life the object being valued.
Methods for calculating the cost of the reversion are determined by the economic position of the object at the end of the last forecast year. If a economic condition real estate is assessed as favorable, it is advisable to calculate the cost of reversion by capitalization of income or by adjusting the value of real estate, calculated on the date of assessment, by the amount of possible depreciation for the analyzed period. If at the end of the forecast period economic situation is assessed as unfavorable, then the reversion is calculated according to the salvage or salvage value.
Since the cash flows and reversions were calculated for the corresponding years of the forecast period, they should be brought to the valuation date or discounted to determine the market value of the property being valued. Current income (annual cash flows) and reversion costs have different discounting methods. The cost of the reversion must be discounted (by the factor of the last forecast year) and added to the sum of the current values of cash flows (sheet No. 12)
The basic formula for calculating the value of real estate under the discounted cash flow method is as follows:
C n \u003d UDP n / (1 + R) n + C K * (1 / (1 + R) n)
where C n - the value of the property on the date of assessment;
DP n - cash flow;
R is the discount rate of the cash flow of period t;
C R - reversion cost at the end of the forecast period.
The calculation of the market value of the property using the income approach is presented in Appendix 4.
The approach of direct comparative sales analysis is based on the premise that the subjects in the market carry out purchase and sale transactions by analogy, i.e. based on information about similar transactions. In other words, the approach is based on the assumption that a prudent buyer for a property put up for sale will pay no more than that for which you can purchase an object of similar quality and suitability.
This approach includes the collection of data on the sales market and offers for properties similar to the one being assessed. Prices for similar objects are then adjusted taking into account the parameters by which the objects differ from each other.
Once prices are adjusted, they are used to determine the market value of the property being valued.
Due to the lack of information about similar objects, a comparative approach cannot be applied in assessing the value of this property.
The final element of the evaluation process is the comparison of results obtained from different approaches. When assessing the market value of the property, income and cost approaches were applied.
Approaches to the assessment have been assigned the following specific weights:
Cost approach -- 0.4;
Income approach -- 0.6;
Comparative approach -- 0.0 (Not used).
The rationale for not using the comparative and income approaches is given above. The market value of the object, determined by the income approach using the discounted cash flow method, was: 23285412 rubles. The market value of the object, determined by the cost approach method, was: 21644755 rubles.
The total cost of the property is 22532503 rubles.
It should be noted that the project is sensitive to changes in variable factors, in this case, an analysis was made of the object's sensitivity to changes in potential gross income, actual gross income, discount rate, net operating income, and operating expenses. A slight change in the discount rate, net operating income, operating expenses does not affect the final value of the property. The most significant changes were revealed when the potential gross income and the actual gross income changed. The calculation is shown on Sheet 13.
As a result of the calculation, the following data were obtained: the cost of the object, calculated using the income and cost approach, taking into account rounding, is 22,500,000 rubles.
An analysis of the best and most efficient use of a land plot is presented in section IV. Management expertise.
Based on the developed business plan for the development of a property using the example shopping center"Galaktika" in Cherepovets can be said to be the best and most efficient use of the object being assessed is its operation, provided that the areas will be leased for manufactured goods. The market value of the property will be 22500000 rubles.
The advantages and disadvantages of the method are determined by the following criteria: the ability to reflect the actual intentions of a potential buyer (investor); the type, quality and extent of the information on which the analysis is based; ability to take into account competitive fluctuations; ability to take into account specific features object, affecting its value (location, size, potential profitability). The income capitalization method is used if: income flows are stable for a long period of time, represent a significant positive value; income streams are growing steadily, at a moderate pace. The result obtained by this method consists of the cost of buildings, structures and the cost of the land, i.e. is the value of the entire property.
Since it is rather difficult to single out a non-inflationary component for real estate, it is more convenient for an appraiser to use a nominal discount rate, since in this case, cash flow forecasts and property value changes already include inflation expectations. The results of calculating the present value of future cash flows in nominal and real terms are the same. Cash flows and the discount rate must match each other and be calculated in the same way.
In Western practice, the following methods are used to calculate the discount rate: 1) the method of cumulative construction; 2) the method of comparing alternative investments; 3) the selection method; 4) the monitoring method. The cumulative construction method is based on the premise that the discount rate is a function of risk and is calculated as the sum of all risks inherent in each particular property.
In Western practice, the following methods are used to calculate the discount rate: 1) the method of cumulative construction; 2) method of comparison of alternative investments; 3) extraction method; 4) monitoring method. The cumulative construction method is based on the premise that the discount rate is a function of risk and is calculated as the sum of all risks inherent in each particular property. Discount Rate = No Risk Rate + Risk Premium.
The risk premium is calculated by summing the risk values inherent in a given property. The cumulative construction method was discussed in detail above when calculating the rate of return on capital as part of the capitalization ratio using the capital cost recovery method. The method of comparing alternative investments is used most often when calculating the investment value of a property.
To calculate DCF, the following data are required: the duration of the forecast period; forecast values of cash flows, including reversion; discount rate. Algorithm for calculating the DDP method. 1. Definition of the forecast period. In international valuation practice, the average value of the forecast period is 5-10 years; for Russia, a typical value will be a period of 3-5 years.
This is a realistic period for which a reasonable forecast can be made. 2. Forecasting the values of cash flows. When real estate is valued using the DCF method, several types of income from an object are calculated: 1) potential gross income; 2) actual gross income; 3) net operating income; 4) cash flow before taxes; 5) cash flow after taxes.
Attention
At the time of investment, the investor tries to consider the object taking into account the possible advantages and attractiveness, taking into account the monetary equivalent of the available profits in terms of their correlation with the purchase price. The effectiveness of this method and its main difference from other methods of determining profitability lies in taking into account a whole range of parameters and their mutual relationship. These parameters include the inflow and outflow of capital, investment, accounts receivable, structural changes.
Discount rate - the value used to calculate the amount of funds expected to be received in the future. The discount rate in the case of real estate is calculated taking into account the "risk-income" link, which includes the full range of possible risks inherent in real estate. The level of liquid investments, compensation costs, and the existence of an investment management system are also taken into account. Stage 4. Discount rate calculation. The purpose of this procedure is to determine the amount of financial receipts that will be received or paid after a specified period of time.
This indicator makes it possible to see the ratio of risk to profitability of the evaluated object.
Info
At the same time, it is assumed that data on the percentage of change should be extracted from the market based on a retrospective analysis of the dynamics of price changes for comparable objects. When using the final percentage method, the reversion price is calculated by increasing (decreasing) the original market value by the amount of the final percentage. When using the annual percentage method, the sale price is determined according to the cumulative scheme: Vn = V0(1 + i)k, (5.5) where V0 is the initial market value, den.
In Western practice, the following methods are used to calculate the discount rate: 1) the method of cumulative construction; 2) method of comparison of alternative investments; 3) extraction method; 4) monitoring method. The cumulative construction method is based on the premise that the discount rate is a function of risk and is calculated as the sum of all risks inherent in each particular property. Discount Rate = Risk Free Rate + Risk Premiums.
The risk premium is calculated by summing the risk values inherent in a given property. The cumulative construction method is discussed in detail in section 4.1. of this benefit when calculating the rate of return on capital as part of the capitalization ratio using the capital cost recovery method. The method of comparing alternative investments is used most often when calculating the investment value of a property.
Important
The capitalization ratio is the rate applied to bring the stream of income to a single amount of value. From an economic point of view, the capitalization ratio reflects the investor's rate of return. Theoretically, the discount rate for a property should directly or indirectly take into account the following factors: Ø compensation for risk-free, liquid investments; Ø risk compensation; Ø compensation for low liquidity; Ø compensation for investment management.
Other income is income, the receipt of which can be linked to the normal use of this property for the purpose of servicing, in particular, tenants (for example: income from the rental of a car park, warehouse, etc.) and not included in the rent. Operating expenses are expenses necessary to ensure the normal functioning of the property and the reproduction of the actual gross income. Operating expenses are divided into:
The amount of semi-fixed costs does not depend on the degree of operational workload of the facility and the level of services provided).
This method can also be used when evaluating leased long term real estate, provided that the sale takes place long before the end of the lease. In this case, the reversion value is calculated as the current value of the uncollected lease payments at the time of sale at a sufficiently low discount rate. It is known that the discount rate reflects the risks of shortfall or loss of income.
The higher these risks, the higher the discount rate. In this case, in the presence of concluded contracts, the risks of non-receipt of income are minimal, and, therefore, the discount rate should be low. The second way to estimate the cost of a reversion is based on the analysis of either the annual or the final percentage change in value over the holding period.
Current unit cost (reversions) is the reciprocal of the accumulated sum of one. This is the present value of one dollar to be received in the future. Since the purpose of an investment is to generate future returns, multiplying the present cost factor of the reversion by the expected future return is a critical step in valuing an investment.
Rice. 3-6. Present Reversal Value - Graphic Illustration
The current cost of the reversion (V) is described graphically in fig. 3-6. This ratio is used to estimate the present value of a known (or predicted) amount of a future lump-sum cash flow, given a given percentage. When applying the present value factor, the concepts of discounting (discounting) or the discount rate (discount rate) are used, opposite to the concepts of accumulation (compounding) and the interest rate (interest rate), used in calculating the accumulated amount of the unit.
Since money has value in time, one dollar received in the future is worth less than a dollar received today. How much less (the amount of the discount) depends on: a) the time gap between cash outflow and cash inflow, and b) the rate of interest or discount required.
For example, at a 10% interest rate (discount rate), the present value of $100.00 expected to be received in one year is $90.91. can earn a net income of $9.09, then the interest will be $9.09; therefore, after one year, the principal investment, including the added interest, will be $100.00 ($90.91 + $9.09 = $100.00).
An investor who expects to receive $100.00 in two years and invests $82.64 today will receive a 10% annual rate. Check: at 10% annual rate$82.64 will turn into $90.91 in a year and $100.00 in 2 years.
The point of making such calculations when working with real estate is to determine the amount that should be paid for the land today in order to resell it for a profit in the future. For example, an investor who expects to resell a property in 2 years for $10,000 must decide how much he should offer for the land today. If an investor requires a 10% rate of return on capital invested, then the maximum amount he can now offer the seller is $8,264. A lower price would increase the rate of return on investment. Conversely, a higher price would prevent the required 10% rate of return from being met.
Formula for calculating the present value of the reversion
The formula for calculating the present value of the reversion is as follows:
The reader sees that this factor is the reciprocal of the accumulated amount of the unit. Therefore, any problem that can be solved using the cumulative sum factor of one can also be solved using the reversion factor, but not through multiplication, but through division.
For example, as shown earlier, $100.00 accumulated at a compound rate of 10% would rise to $161.05 in five years. Since $100.00 would be $161.05 in five years, then dollars is the amount that will increase to $100.00 in five years. Below is an analysis of the coefficients for this example:
Table building
As in the case of the accumulated amount of the unit, the regular and intensive use of the factor of the present value of the unit in the calculations has necessitated the construction of standard tables. The present value of a unit is given in column 4 of many compound interest tables. It is calculated using the formula described earlier:
Since this is the reciprocal of the accumulated sum of one, tables can be constructed accordingly, as shown in Table. 3-5:
Building a table of the present value of the reversion (annual rate = 10%)
| Year |
Accumulated |
reciprocal |
current value |
| 1 | 1,1 | 1/1,1 | |
| 2 | 1,21 | 1/1,21 | |
| 3 | 1,331 | 1/1,331 | |
| 4 | |||
| 5 |
Some tables on the same page show the values of the present value of the unit at different discount rates (percentage). Such tables can be useful, for example, to show the future purchasing power of $1 at various rates of inflation. Tab. 3-6 shows this at rates of 3, 6, 10 and 15%. The line of the current cost of a unit at various discount rates is shown graphically in fig. 3*7.
TABLE 3-6
Future purchasing power of $1.00 at various inflation rates
inflation index
| 3% | |||
| 0,9709 | |||
| 0,9426 | |||
| 0,9151 | |||
| 0,8885 | |||
| 0,8626 |
More frequent discounting
As in the case with compound interest, intervals between discount periods can be shorter (more frequent) than one year. In the calculation of the fair value of the reversion, this is taken into account in the same way as in the accumulation of interest. The nominal discount rate is divided by the frequency of intervals (for example, for quarterly discounting divided by 4), and the number of periods in a year is multiplied by the number of years.
Present value lines at different discount rates
Application of a financial calculator
In order to use the calculator to determine the present value of a known future amount, enter the number of time periods - N, the periodic interest rate - %I and the known future value - FV. Then press the COMPUTE and PV keys. The display will show the current value. (On some calculators, the CI register must first be set.) Figure 3-8 shows which calculator keys to use to determine the present value of $10,000 to be received in five years at a 10% annual discount rate.
Result: 6209.21 (on display)
Rice, 3-in. Calculator keys used to calculate the present value of a reversion at a discount rate of 10%, discounted annually for 5 years, and a future value of $10,000
The calculation of utility bills for a period of 5 years is shown in Table 24.
Table 24
Justification of the discount rate
A discount rate is a factor used to calculate the present value of an amount of money received or paid in the future.
Cash flows and the discount rate must match each other and be calculated in the same way.
The discount rate is calculated using the cumulative construction method.
As in the calculation of the capitalization ratio, the risk-free rate was taken to be the average rate of return of Sberbank of Russia on ruble deposits for a period of more than 12 months, which is 9.45% as of the valuation date. The risk of investing in this property is taken into account at a rate of 50% of the risk-free rate.
The discount rate, taking into account the growth rate of utility bills of 15% for the remaining period (last year), is:
9.45% + (9.45 x 0.5) + 15% = 29%
9.45% - risk-free rate
(9.45 * 0.5) - the risk of investing in this property is taken into account in the amount of 50% of the risk-free rate.
15% - the risk of rising utility bills.
Calculation of the market value using discounted cash flows
Calculation of the market value using the DCF method according to the formula:
PV = + M,
where PV – current value;
FROM i - period cash flow t;
i t - discount rate of the cash flow of the period t;
M– cost of reversion, or residual value.
The residual value, or reversal value, must be discounted (to the last forecast year) and added to the sum of the current values of the cash flows.
Thus, the cost of a one-room apartment is equal to:
Present value of projected cash flows +
The present value of the residual value (reversion).
|
Table 25 . Calculation of the market value of the apartment |
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|
Position name |
|||||||
|
forecast period |
residual |
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|
Net income, rub. |
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|
Utility payments, rub. |
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|
Cash flow, rub. |
|||||||
|
Present value ratio |
|||||||
|
Capitalization ratio |
|||||||
|
Discount rate, % |
|||||||
|
The amount of the current value of the cash flow, rub. |
|||||||
Calculation of the cost of reversion.
Reversion - residual value object at the termination of receipts of a stream of incomes.
The cost of reversion can be predicted using:
setting the sale price based on an analysis of the current state of the market, monitoring the cost of similar objects and proposals regarding the future state of the object;
making assumptions regarding changes in the value of real estate over the period of ownership;
capitalization of income for the year following the year of the end of the forecast period, using a self-calculated capitalization rate.
The residual value of the reversion will be:
73795:0.15=491967 rub. (Chod of last year/cap ratio)
The current cost of the reversion will be:
M
M is the cost of reversion;
i - discount rate;
n is the estimated period.
491967 * 1 / (1 + 0.29) 5 \u003d 137,717 rubles.
The value of the object of assessment =Present Value of Projected Cash Flows + Present Value of Residual Value (Reversions).
165,567+137,717=303,284 rubles, rounded 303 300 rub.
Reconciliation of the results obtained by the income approach:
Table 26. Weighting factors
|
Indicators |
Direct income capitalization method , % |
Discounted cash flow method , % |
|
|
Reliability of information |
|||
|
Completeness of information |
|||
|
The ability to take into account the actual intentions of the buyer and seller |
|||
|
Ability to take into account market conditions |
|||
|
Ability to take into account the size, location, profitability of the object |
|||
|
Assumptions taken in calculations |
|||
|
Weighted indicators of the reliability of the assessment method (arithmetic mean value of Q) |
The cost of the object is determined by the formula:
S = S 1 XQ 1 + S 2 XQ 2 ,
where S is the reasonable market value of the appraisal object, rub.;
S 1 , S 2 , - the value of the object, determined using the methods of direct capitalization of income and discounted cash flows, respectively;
Q 1 , Q 2 - the arithmetic mean of the reliability of methods of direct capitalization of income and discounted cash flows, respectively.
The matching results are summarized in Table 30.
Table 27 . Reconciliation of results in determining the market value
Thus, based on the analysis and calculations performed, the final value of the market value of the apartment, determined by the income approach as of January 15, 2009, taking into account rounding, will be:
349,400 (three hundred forty-nine thousand four hundred) rubles.
4.3 Reconciliation of assessment results.
The traditional approaches in valuation activities have yielded the following results:
Table 28
The purpose of summarizing the results of all approaches used is to determine the advantages and disadvantages of each of them and, thereby, to develop a single cost estimate.
As a result of the analysis of the applicability of each approach to assess the object under consideration, the following conclusions can be drawn.
The comparative approach reflects the price that may arise in the market, taking into account all market trends and buyer preferences. It is most applicable to the developed sectors of the real estate market, which is the housing market.
The cost approach is useful mainly for object evaluations, unique in their type and purpose, for which there is no market, or for objects with little wear. In assessing the costs of reproduction, the share of expert judgments is high. The main disadvantage of the cost approach, despite the high reliability of its results, is that the cost calculated by this approach does not take into account the cost of allocating a land plot and does not reflect the frequently changing situation in the real estate market.
The yield approach in this case reflects the marginal value that a potential investor would not pay more than based on the typical use of the property and the accepted rates of return.
After analyzing the goal of the assessment, the nature of the use of the object of assessment, the degree of completeness and reliability of the initial information, the magnitude of the error obtained for each of the approaches, we can conclude that the result obtained within the framework of the comparative approach corresponds to the highest degree of reliability. It is assigned a specific gravity of 0.7. The cost approach in this case does not fully reflect the market situation and the degree of reliability of the result obtained, it is estimated by the indicator of the specific weight of 0.2. The income approach, because it uses predictive values, is assigned a specific weight of 0.1. A summary of the results is given in Table 29.
Table 29
Based on the data given in the work and the above conditions, rounding the value obtained as of the valuation date, the object has a market value:
1,856,000 (one million eight hundred and fifty six thousand) rubles.
List of sources used
Tarasevich E.I. Real estate appraisal. - St. Petersburg. SPbGTU. 1997.
Simionova N.E. Property valuation methods: Business, real estate, land, machinery, equipment and vehicles.-Rostov n/a: Phoenix, 2006.
Friedman D., Ordway N. Analysis and valuation of income-generating real estate.-M.: Delo, 1997.
Gribovsky S. Valuation of profitable real estate. - St. Petersburg. 2000.
Gribovsky S.V., Ivanova E.N., Lvov D.S., Medvedeva O.E. Valuation of real estate. - Moscow: Interreklama, 2003.
The main sources of information used in term paper, became lecture materials, data from open electronic and printed publications, where information about public offers, analytical materials, expert assessments of specialists from leading Yaroslavl real estate agencies are posted in the free access mode. Among them are the periodicals "Iz ruk v ruki", "Apartments and prices", the online edition of the newspaper "Iz ruk v ruki", as well as websites http cost one-room apartmentsCoursework >> Economics
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