What are the methods of valuation mentioned?
- Comparative
- Investment
- Depreciated Reinstatement cost
- Residual
- Profits
These methods are used for property valuation alongside the profits method.
When would you use the Depreciated Replacement Cost (DRC) method?
To value specialized assets with no or limited comparable sales data
Examples include owner-occupied properties, leisure centers, schools, and industrial assets like airports or oil refineries.
Can you exclusively use the investment method?
No
Other methods like the income and cost approaches are also used, requiring professional judgment.
What is a Net Initial Yield (NIY)?
Annual return from a property based on current income, expressed as a percentage of market value plus purchaser’s costs
NIY is a key metric in property investment analysis.
What is an equivalent yield?
Time weighted average return after adding notional purchasers costs
Assumes rent is received annually in arrears.
What valuation methodology was adopted for a GP surgery?
Used a ‘simple investment’ method with a single rate, YP in perp
This method is for properties with an income stream expected to last forever.
What does lucrative rents imply regarding yields?
Stronger tenant covenant strength leads to lower yields
Lower perceived risk for investors due to strong NHS backed income influences a stronger, lower yield.
How would your approach differ if the property is over rented?
I would adopt the hardcore and layer approach
This approach considers the implications of over-renting on valuation.
What specific advice was provided regarding the freehold interest in a dental unit?
Advised on Market Value with tenants in situ, sale and leaseback options, and vacant possession value
This advice helps clients understand their options for the property.
Why was the assumption made that a tenant was in place during valuation?
To provide an opinion of Market Value with adherence to Market Rent
The client was exploring options including a lease renewal.
What is VPS 1
VPS 1 – Terms of engagement (scope of work)
What is VPS 2
VPS 2 – Inspections, investigations and records
Within your case study
What is VPS 3
VPS 3 – Valuation reports. This has now changed as of 31/01/2025 to VPS 6 in the latest Red Book.
What is VPS 4
VPS 4 – Bases of value, assumptions and special assumptions
What is VPS 5
VPS 5 – Valuation approaches and methods.
What is a professional standard
A RICS Professional Standard is a set of documents that establish requirements and expectations for RICS members and firms to follow, ensuring a baseline of competence, ethical behaviour, and good practice in their professional services.
What is an assumption
A supposition taken to be true. It involves facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, do not need to be verified by the valuer as part of the valuation process. Typically, an assumption is made where specific investigation by the valuer is not required in order to prove that something is true.
What is an external valuer
A valuer who, together with any associates, has no material links with the client, an agent acting on behalf of the client or the subject of the assignment.
What is Market Rent
The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion
What is Market Value
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion
What is marriage value
An additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.
What is a special assumption
An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.
Who is a special purchaser
A particular buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market.
What is the methodology for a DCF?
- Estimate the cash flow (income less expenditure) for
an agreed holding period - Estimate the exit value at the end of the holding
period - Select the discount rate
- Discount cash flow at discount rate
- Value is the sum of the completed discounted cash
flow to provide the NPV
-
ETHICS48
-
CLIENT CARE14
-
COMMUNICATION & NEGOTIATION7
-
HEALTH & SAFETY5
-
ACCOUNTING PRINCIPLES AND PROCEDURES20
-
BUSINESS PLANNING12
-
CONFLICT AVOIDANCE7
-
DATA MANAGEMENT32
-
DIVERSITY, INCLUSION & TEAM WORKING9
-
INCLUSIVE ENVIRONEMENT13
-
SUSTAINABILITY33
-
INSPECTION31
-
MEASUREMENT24
-
VALUATION26
-
LOAN SECURITY VALUATION15
-
PURCHASE AND SALE1
-
DEVELOPMENT APPRAISAL Q&A REVISION63
-
DEVELOPMENT APPRAISAL SPECIFIC Q'S18
-
CASE STUDY Q'S13
-
DEFINITIONS15
