How Many Valuation Method?

new development 

link house

Section 13

factory

hotel
 cost method

comparison method

residue method

investment method

profit method - account




How Many Formula Involve?

  1. Net Income
  2. Capital Value
  3. Year Purchase
  4. Present Value
  5. Net Value 
  6. GDV
  7. GDC
  8. Development Profit
  9. Land Cost
  10.  



Net Income / NI
= Gross Rental - Out Going 
Question : 
What is the net rental? If

 Rental : RM 1,000
Out going RM 1,000 x 20% = RM 200

 Answer :
RM 1,000 - RM 200 = RM 800

what is outgoings**?( 20% on market rental )
  1. insurance ( Fire insurance / household insurance )
  2. repairs ( internal & external )
  3. property taxes ( quit rent, cukai pintu, premium )
  4. maintenance fee
  5. management fees - ( 10% on rental paid )




Capital Value

= Year Purchase x Net Income





 Freehold

Leasehold

Year Purchase / YP
 = 1/i




Example : 
YP 
= 1 / 0.08
= 12.5


Year Purchase / YP
= (1 - PV ) / i

where PV = 1 / (1+i )^n


Example :
 PV
=1 / (1 + 0.08 ) ^5
= 1 / 1.08^5
= 1 / 1.46932
= 0.68058

YP
= ( 1 - 0.68058 ) / 0.08
= 0.31942 / 0.08
= 3.99275






n = 5

n = 6

n = 7
=1 / (1 + 0.08 ) ^5
= 1 / 1.08^5
= 1 / 1.46932
= 0.68058


YP
= ( 1 - 0.68058 ) / 0.08
= 0.31942 / 0.08
= 3.99275
=1 / (1 + 0.08 ) ^6
= 1 / 1.08^6
= 1 / 1.58687
= 0.630171


YP
= ( 1 - 0.630171) / 0.08
= 0.369283 / 0.08
= 4.62286
=1 / (1 + 0.08 ) ^7
= 1 / 1.08^7
= 1 / 1.713824
= 0.58349


YP
= ( 1 - 0.58349 ) / 0.08
= 0.41651  / 0.08
= 5.2063

The longer the tenancy agreement, the higher the YP value






i = 8%

i = 9%

i = 10%
=1 / (1 + 0.08 ) ^5
= 1 / 1.08^5
= 1 / 1.46932
= 0.68058

YP
= ( 1 - 0.68058 ) / 0.08
= 0.31942 / 0.08
= 3.99275
=1 / (1 + 0.09 ) ^5
= 1 / 1.09^5
= 1 / 1.53862
= 0.64993

YP
= ( 1 - 0.64993 ) / 0.09
= 0.35006 / 0.09
= 3.88956
=1 / (1 + 0.10 ) ^5
= 1 / 1.1^5
= 1 / 1.61051
= 0.62092

YP
= ( 1 - 0.62092 ) / 0.1
= 0.37908 / 0.01
= 3.7908


the higher the risk factor the lower the YP value.






 Freehold

 Leasehold with n = 30 year

 Leasehold with n = 99 year
.

YP 
= 1 / 0.08
= 12.5

=1 / (1 + 0.08 ) ^30
= 1 / 1.08^30
= 1 /10.06265
= 0.09937

YP
= ( 1 - 0.09937 ) / 0.08
= 0.90062 / 0.08
=11.257
=1 / (1 + 0.08 ) ^99
= 1 / 1.08^99
= 1 / 2036
= 0.00049

YP
= ( 1 - 0.00049 ) / 0.08
= 0.99951 / 0.08
=12.493
.

If tenancy agreement tenure is 99 year . The leasehold YP value is almost the same like Freehold YP value







 Comparison Method

Investment Method

GDV
= Selling Price x Number Of Unit


GDV
= Net Income x YP in perpetuity 








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