REE-3043 Lecture Notes - Lecture 12: Capitalization Rate, Market Participant, Earnings Before Interest And Taxes

• School: FSU
• Department: Risk Management/Insurance, Real Estate and Legal Studies
• Course: REE-3043
• Professor: William M Woodyard

Document Summary

Traditional approaches to estimating value: sales comparison approach, cost approach. Types and sequence of adjustments: transaction price, +/- conditions of sale, +/- financing terms, normal sale price, +/- market conditions, market-adjusted normal sale price, +/- location, +/- physical and legal characteristics, etc, final adjusted sale price. Estimation of the cost of the improvements: reproduction cost, replacement, cost estimation methods, comparative unit (e. g. , $/sq. ft. , unit in place (e. g. , $/component installed, breakdown approach (e. g. , labor, materials, etc. ) Estimation of accrued depreciation: physical deterioration, short-lived (curable and incurable, long-lived, function obsolescence, curable. Incurable: external obsolescence, noisy street, ca(cid:374)"t (cid:271)e (cid:272)o(cid:374)trolled. Valuation models in the income approach: discounted cash flow analysis, value estimated as: the present value of the expected cash flows. Investment value uses the expected cash flows and discount rate of a particular investor: market value uses the expected cash flows and discount rate of the typical market participant, direct capitalization, value estimated as: v= noi/r.