A valuer will normally use a formula which consists of:
- Applying a capitalisation rate to the rental. For example, a building returning $100K per annum subject to a 5% cap rate is valued at $2 million. The same building having a 7% cap rate is valued at $1.43 million.
- Valuing the land and improvements based on a square meter rate for the land, e.g. $500 per square metre and in the case of buildings or improvements replacement value less allowance for depreciation.
We are happy to explain in more detail these valuation methods to prospective clients.
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