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    Investment Value

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    NURASIKIN ABDUL RAHIM
    This document discusses investment value and yield in property valuation. It defines yield as the ratio of benefits to capital investment. Yield acts as a reward for investors and can be used to cover risks. There are two main types of yield - income yield and total yield. Income yield is calculated by expressing rental income as a percentage of capital outlay. Total yield considers potential capital growth or appreciation over time using methods like internal rate of return. The document provides an example calculation and discusses factors that influence yield for property investments.

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    Investment Value

    Uploaded by

    NURASIKIN ABDUL RAHIM
    38 views11 pages
    This document discusses investment value and yield in property valuation. It defines yield as the ratio of benefits to capital investment. Yield acts as a reward for investors and can be used to cover risks. There are two main types of yield - income yield and total yield. Income yield is calculated by expressing rental income as a percentage of capital outlay. Total yield considers potential capital growth or appreciation over time using methods like internal rate of return. The document provides an example calculation and discusses factors that influence yield for property investments.

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    valuation

    Original Title

    INVESTMENT VALUE

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    This document discusses investment value and yield in property valuation. It defines yield as the ratio of benefits to capital investment. Yield acts as a reward for investors and can be used to cover risks. There are two main types of yield - income yield and total yield. Income yield is calculated by expressing rental income as a percentage of capital outlay. Total yield considers potential capital growth or appreciation over time using methods like internal rate of return. The document provides an example calculation and discusses factors that influence yield for property investments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    38 views11 pages

    Investment Value

    Uploaded by

    NURASIKIN ABDUL RAHIM
    This document discusses investment value and yield in property valuation. It defines yield as the ratio of benefits to capital investment. Yield acts as a reward for investors and can be used to cover risks. There are two main types of yield - income yield and total yield. Income yield is calculated by expressing rental income as a percentage of capital outlay. Total yield considers potential capital growth or appreciation over time using methods like internal rate of return. The document provides an example calculation and discusses factors that influence yield for property investments.

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    RES451

    Property valuation technique INVESTMENT VALUE


    Prepared by :
    Sr. Dr Nur Lesya Firsya Binti Johaimi Ling, MRISM
    RES451
    Property Valuation Technique

    Investment Value Framework


    Components:
    ➢ Net income or cash flows
    ➢ Time or the period over which the net income or cash flows are received
    ➢ Yield or the rate of return
    • The key variable – the yield which reflects expected future income change &
    performance of the investment in comparison to alternative investments
    RES451
    Property Valuation Technique

    Definition and Function of YIELD


    • Is defined as the ratio of benefits over the capital investment
    • •The return on investment (ROI) is the ratio between return of investment over the
    capital outlay
    • •Also known as the rate of return (ROR) or capitalisation rate in property
    investment
    • •Act as a reward for an investor.
    • •Can be used to cover and reduce the risk of loosing the money and the drop in
    inflation
    • •Also function as units of comparison to understand the prices of value of certain
    investment
    RES451
    Property Valuation Technique

    How to calculate YIELD


    • The calculation of yield is:
    • INCOME (RETURN) x 100
    Capital
    • = _______%

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    RES451
    Property Valuation Technique

    YIELD in Property Investment

    • Tells an investor the amount of annual return that he or she is likely to get
    from the investment
    • •It is calculated by expressing the rental income as a percentage of the
    capital outlay of the property (Stephen Ludlow)
    • Types of Yield is divided into two:
    i)Income Yield
    ii) Total Yield (Internal Rate of Return – IRR)

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    RES451
    Property Valuation Technique

    Types of YIELD

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    RES451
    Property Valuation Technique

    Add a footer 7
    RES451
    Property Valuation Technique

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    RES451
    Property Valuation Technique

    EXERCISES
    A commercial property investment located in a city center, let
    to a tenant at RM 6,000 p.m. gross for an unexpired term 4
    years, was recently sold out at RM 1 million. It is estimated that
    property could fetch a rental value of RM7,000 per month gross
    in the open market, and if sold with vacant possession could
    fetch a price of RM 1.2 million.

    Using the scenario, briefly explain and calculate the different


    type of yields that can be associated with property investment.

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    RES451
    Property Valuation Technique

    FACTORS INFLUENCING YIELD


    • Security & risk of income & capital
    • Growth prospects or depreciation
    • Liquidity
    • Marketability
    • Taxation liability
    • Management costs
    • Transfer costs
    • Frequency & timing of income

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    THANK YOU!!!

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