You are a qualified valuer with a graduate valuer working under your supervision. You want to train
Question:
You are a qualified valuer with a graduate valuer working under your supervision. You want to train up this junior valuer and give him a valuation task using the following data:
A freehold shop with an existing tenancy that will expire in 3 years. The existing annual rent is $42,500 gross, and the outgoings are at 25% of gross rent. The capitalisation rate for similar properties is 7% and the current full market gross rent is $50,000 p.a. In addition, market data shows that the term yield is 6%.
The junior valuer has prepared the following valuation for your scrutiny.
Annual gross rent | $42,500 |
Less outgoings @ 25% | $10,625 |
Net rent | $31,875 |
YP in perp @ 7% | 14.2857 |
Market value | $455,357, say, $456,000 |
Comment on the validity of this valuation. Is it correct? If not, what is wrong?
Prepare a valuation to show the junior valuer the correct approach.
Show the junior valuer how the equivalent yield for this property is calculated.
Social Statistics For A Diverse Society
ISBN: 9781483333540
7th Edition
Authors: Chava Frankfort Nachmias, Anna Leon Guerrero