Valuers now move to the income approach to Property Valuation in dealing with this Property valuers are really getting to the end of the major approaches so the three major approaches you need to be comfortable with to have a good understanding of the comparable sales approach or the sales approach the cost approach.
And now the income approach this income approach you will find also relies to a certain extent on a fair bit of market data and so real estate valuers gonna have to look at this whole question there is the income approach really just a variant of the comparable sales approach.
We’re going to end up with the same difficulty we had with the cost approach and that is that Property valuers do rely a fair bit on market data and so does that make it a sales approach or something else and the answer is because our focus is something else that’s really what’s going to define the method even though.
We rely quite heavily on market data moreover Real estate valuers are going to look at the way that the three approaches to evaluation actually have considerable overlap that’s going to be drawn out far more in the study guide but for the moment I just like you to think about the way that when we do the cost approach.
We are also interested in a comparable sales especially for the land when property valuers do the income approach we’re going to see that we’re going to be interested in costs in this case property valuation service providers are going to be looking at operating costs rather than capital costs but cost estimation.
And so on is also very important and we’re also going to be going to the market for our various bits of data for rental darka to eventually calculate the yield and so what we need to be aware of is that these three approaches are actually interrelated oh.
And by the way by the time you go back to the sales approach which you might say well that’s the bedrock that’s the base why don’t we simply use that all the time you’ll also find that when we do adjustment grits we’re really looking at cost issues and to a certain extent when we’re looking at the most probable buyer.
Property valuation service providers are often considering things which are getting very close to some of the elements that are important in the income approach and so the three approaches actually have a lot of overlap let’s look now at more detail into the income approach itself this module really begins with a little bit of a recap.
Or rather taking further into depth an idea that Property valuation service providers first encountered in the first module and that was that the first fact of property value is its rental value and it’s really from its rental value that you get its capital value or sale price.
We look further in this module into the history of this particular idea and Real estate valuation service providers see that there has been a time in European history when property did not actually have a capital value or a sale price at all and that was only about years ago back about a century.
Or so before Shakespeare that is because property wasn’t bought and sold before about the Year more or less and because it was hardly ever bought or sold sale price was simply irrelevant despite rental value being extremely important and in the study guide.
Property valuers go further into looking at the way that rental value comes from the human value the experiential value of land in the life of society and that’s important because it gives us the first idea that’s important for this particular approach.
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Property Valuation And The Income Approach Part - 1