Valuation is a means of providing an assessment of the capital value of, or the income arising from a property investment. There is a range of possible investment opportunities from works of art through oil futures and gold to shares, government stocks and property. The point of investment is that it provides the investor with an income, growth in capital value of the investment, or both. Thus investment involves an initial payment (a capital outlay) so that an income can be received in the future over a period of time.
The valuation of real estate is central tenet for all business. Land and property are factors of production and, as with any other asset, the value of the land flows from the use to which it is put, and that in turn is dependent upon the demand (and supply) for the product that is produced. Valuation in its simplest form is the determination of amount for which the property will transact on a particular date.
Purpose of Valuation
1. Sale report
2. Accounting purposes
3. Loan security
4. Minimum price or auction reserve
5. Insurance
6. Taxation
7. Compulsory purchase
Valuation Models
1. Investment method
2. Comparative method
3. Residual method
4. Contractors method
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