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So in this article, we’ll walk through exactly what a discount rate represents, how it’s used in real estate private equity, and how to choose the right discount rate for your next commercial real estate investment opportunity.
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Dec 6, 2022 · A property’s rateable value might change when we undertake a revaluation to reflect changes in the property market. Your local council will then calculate your bill by multiplying your rateable...
- Overview
- What is meant by disrepair
- Rateable value and disrepair
- What is meant by repair
- Uneconomic to repair
- Properties being repaired
- Alterations being carried out to a property
- If you believe your property is in ‘uneconomic repair’
- Inspection of your property
The Valuation Office Agency does not usually change your rateable value if your property is in a state of disrepair. There are however, exceptions to this.
A property might be in disrepair because:
•it has fallen into disrepair over time
•it has been damaged
•it has been vandalised
Legislation provides a definition of rateable value that applies to all properties. Rateable value represents the rental value of a property if it was let at the standard valuation date on the basis that the tenant pays for all repairs during the letting. The definition includes an assumption that the property is let in a state of reasonable repair.
As a general rule disrepair does not affect a property’s rateable value, however there are exceptions:
•the property is in such a state of disrepair that a reasonable landlord would consider the repair costs to be uneconomic
•the property is in such a state of disrepair that a reasonable landlord might repair only part of it
•the property has been so badly damaged by fire that it cannot be economically repaired and used
If a reasonable landlord would consider it uneconomic to do the repairs, then the rental valuation will be based on the basis of the actual state of repair.
Repair only covers fixing any parts of the property that are in disrepair. It should be repaired to a standard that is expected for a property of its age, character, locality and the type of tenant likely to occupy it.
For example, the expected standard of repair for a modern office building would be much higher than that for an old warehouse.
A property is considered uneconomic to repair if the repair costs are so out of proportion to the rental value that a reasonable landlord would not spend the money doing them. This is because it would be unlikely they would get an adequate return on the investment and it would not be financially worthwhile.
If work is being undertaken to repair a property, this is considered in just the same way as a property needing repair. If the works would be considered economically reasonable then the property is treated as already being in reasonable repair for rating. The Valuation Office Agency (VOA) may review the rateable value if repair work means the prope...
It may be that the rateable value of a property can be reduced whilst the work is underway, depending on the extent of the work being carried out to improve, extend or enhance it. Each case will be considered on its own facts.
If you don’t feel that it’s cost effective to repair your property, you should tell the VOA using their online service as soon as possible. You need to provide all the evidence that your property is in a state of substantial disrepair, so that the valuation officer can investigate.
Useful evidence includes:
•photographs of the repairs required and the extent of those repairs
•an itemised estimate of repair costs and work required
•the history of occupation and use of the premises
•future plans or proposals for the occupation and use of the building, including any planning applications or permissions
A valuation officer may need to inspect your property and you should let the VOA know of any health and safety arrangements, if applicable.
Market cap rates change as the market perception of risk, cash flow, or growth changes. While cap rates are a good “quick and dirty” tool for pricing real estate assets, students should be aware that cap rates can only be applied when using stable NOI estimates.
May 11, 2008 · The most evident impact of interest rates on real estate values is in the derivation of discount or capitalization rates, as they are equal to the risk-free rate plus a risk premium.
- Troy Segal
- 2 min
After repair value (ARV) is an important calculation used by real estate investors who wholesale, fix-and-flip, or purchase value add real estate. ARV can help an investor decide whether a deal is too good to pass up, or one that may end up losing money.
People also ask
Why do market cap rates change?
How do mortgage rates affect property values?
Is the current mortgage rate a deciding factor in real estate valuation?
Does disrepair affect a property's rateable value?
What affects real estate values?
Why do real estate discount rates vary?
Economic obsolescence refers to the loss of value of a real estate property due to factors that are external to the property. Common causes of economic obsolescence include a change in aircraft flight patterns, increased crime rates, construction of a busy highway, construction of a landfill nearby, etc. Economic obsolescence is incurable ...
