Private Real Estate – Cost Approach (why no adjustment?)

[DianaPowell]

Guys can you help with this question. I don’t understand why there is no adjustment for incurable physical depreciation.

Value Property B using the cost approach

Size (sqm) = 4,000
Lease type = Net
Expected LTV ratio = 75%
Effective age = 25
Remaining economic life = 65

Rental income (at full occupancy) = $700,000
Other income = $35,000
Vacancy and collection loss = $0
Property management fee = $25,000
Other op expense = $0
Discount rate = 12.5%
Growth rate = 3.5%

Market value of land = $2,000,000
Replacement cost of building including developer’s profit = $7,500,000
Deterioration – Curable and Incurable $3,750,000

Obsolescence:
Functional $350,000
Locational $500,000
Economic $500,000

Answer: $4,400,000

Value = $2,000,000 + $7,500,000 – $3,750,000 – $350,000 – $500,000 – $500,000

 

[DominicWhite]

There is a very cool life hack how to quickly find a good and inexpensive realtor who will help you sell your property and will not take as much money for it as ordinary real estate companies

 

[JaneBower]

The fact is that the real estate market has been too crowded lately and therefore there is a subjective assessment of real estate, because of which prices may be either underestimated or overstated for some reason. If you want to sell or buy a property, then the criteria by which you should calculate this property are quite simple. You can find these criteria on the Internet and calculate the cost based on them. Also, many banks produce Equity Release London in order to reduce the cost of real estate in certain regions, as we all know that many people lose their property and it passes into the possession of the bank. Therefore, in order to save money on buying real estate, many people purchase shares from banks and thereby reduce the cost of real estate purchased from the bank.