InVEMA13 - Real Estate Valuation
InVEMA13 - Real Estate Valuation
■ Approaches to valuation
❑ Cost approach
❑ Comparative sales approach
❑ Income approach
Real Estate Valuation
■ Cost approach
❑ Based on the idea that an investor should not pay
more for a property than it would cost to rebuild it
at today’s prices for land, labor and construction
materials.
❑ A good method to use as a check against a price
estimate, but should not be used exclusively.
Real Estate Valuation
■ Income approach
❑ Value is the present value of all property’s future
income.
■ Investment Analysis
❑ Differs from market valuation in 4 ways:
■ Retrospective vs prospective
■ Impersonal vs personal
■ Unleveraged vs leveraged
■ Net operating income vs after-tax cash flows
Real Estate Valuation
■ Effect of positive leverage