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    Real Estate Appraisal Formulas

    Uploaded by

    MichelleOgatis
    The document discusses various real estate appraisal formulas used to determine the value of real property. It covers topics such as gross income multipliers, capitalization formulas, time value of money, capitalization rate derivation, mortgage constants, equity dividend rates, debt coverage ratios, band of investment, depreciation, interest, discount, and income ladders. The key formulas presented are used to calculate a property's potential gross income, effective gross income, net operating income, market value, capitalization rate, mortgage constant, equity dividend rate, and debt coverage ratio.

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    Real Estate Appraisal Formulas

    Uploaded by

    MichelleOgatis
    3K views4 pages
    The document discusses various real estate appraisal formulas used to determine the value of real property. It covers topics such as gross income multipliers, capitalization formulas, time value of money, capitalization rate derivation, mortgage constants, equity dividend rates, debt coverage ratios, band of investment, depreciation, interest, discount, and income ladders. The key formulas presented are used to calculate a property's potential gross income, effective gross income, net operating income, market value, capitalization rate, mortgage constant, equity dividend rate, and debt coverage ratio.

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    Real Estate Appraisal formulas

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    The document discusses various real estate appraisal formulas used to determine the value of real property. It covers topics such as gross income multipliers, capitalization formulas, time value of money, capitalization rate derivation, mortgage constants, equity dividend rates, debt coverage ratios, band of investment, depreciation, interest, discount, and income ladders. The key formulas presented are used to calculate a property's potential gross income, effective gross income, net operating income, market value, capitalization rate, mortgage constant, equity dividend rate, and debt coverage ratio.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3K views4 pages

    Real Estate Appraisal Formulas

    Uploaded by

    MichelleOgatis
    The document discusses various real estate appraisal formulas used to determine the value of real property. It covers topics such as gross income multipliers, capitalization formulas, time value of money, capitalization rate derivation, mortgage constants, equity dividend rates, debt coverage ratios, band of investment, depreciation, interest, discount, and income ladders. The key formulas presented are used to calculate a property's potential gross income, effective gross income, net operating income, market value, capitalization rate, mortgage constant, equity dividend rate, and debt coverage ratio.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    CHAPTER 1

    REAL ESTATE APPRAISAL FORMULAS


    1. GROSS INCOME MULTIPLIERS

    The multipliers are often used in determining the value of a real property

    PGI - Potential Gross Income
    GIM - Gross Income Multiplier
    V - Market Value ( the use of Fair Market Value is not encouraged under the IVS/PVS)
    EGI - Effective Gross Income
    Re - Rental Rate
    NIM - Net Income Multiplier
    NOI - Net Operating Income



    Where: EGI = PGI Vacancy, or Losses


    Where : NOI = EGI Opex


    2. CAPITALIZATION FORMULAS
    CR - Capitalization Rate
    I - Income ( or Net Operating Income, NOI)
    V - Market Value



    3. TIME VALUE OF MONEY FORMULA

    FV - Future Value
    PV - Present Value
    n - Duration; period (may be in years, months, days)
    I - Interest rate; discount rate
    PMT - Payment; Annuities xxx



    3.3 Where : Sinking fund factor =


    4. CAPITALIZATION RATE DERIVATION
    SP - Selling Price
    Opex - Operating Expense

    4.1


    =



    4.2 CR = Over-all Rate = Recapture rate + Return of
    Capital (or Interest rate)
    5. Mortgage Constant
    MC - Mortgage Constant
    ADS = Annual Debt Service ( or annuity in some situations)
    M = Mortgage; Mortgage Equity

    5.1



    6. Equity Dividend Rate

    ED - Equity Dividend
    EDR - Equity Dividend Rate; Cash on Cash; Equity Yield Rate; Equity Capitalization Rate
    E - Equity; Equity Investment



    Where : ED = NOI ADS

    7. Debt Coverage Ratio

    DCR - Debt Coverage Ratio



    8. Band of Investment

    CR - Capitalization Rate
    M - Mortgage Constant
    MP - Mortgage Position = LTV Ratio = Loan / Value
    EP - Equity Position = 1 LTV Ratio



    9. Depreciation (Straight Line Method)

    For machineries:

    9.1 Composite Life = Total Depreciated Value / Annual
    Depreciation

    9.2 Recapture = 1 / n

    10. Simple Interest

    I - Interest Rate
    P - Principal
    r - Rate of Interest
    t - Time
    F - Final Amount

    10.1 I = Prt
    10.2 F = P + I = P (1+rt)

    Bankers Rate :

    10.3 Io =

    = Ordinary Interest

    10.3 Ie =

    = Exact Interest

    11. Simple Discount

    11.1 D = Fdt
    Where: D - Simple Discount
    d - discount rate

    11.2 D = F Pt = D / Fd

    Present Value or Proceeds:

    11.3 P = F D = F (1 dt)



    12. INCOME LADDER


    Potential Gross Income
    ( or Gross Scheduled Income)
    PGI
    Less: Vacancy and Losses (V/L)
    Effective Gross Income EGI
    Less: Operating Expenses (Opex)
    Net Operating Expense NOI

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