Income approach valuation method.

Income approach valuation method.

studen name: Luisa Fernanda CardozoDate: 03 April 2020 Group Number :81

Income Approach

The Income Approach is based on the Principle of Anticipation, by means of which future net monetary benefits are converted into an estimate of Present Value, using a discount rate appropriate to the type of good being studied.

Approach and main valuation methods

Market Approach

It applies to non-reproducible assets such as land. It is the analysis of value through the analysis and comparison in the market of recent transactions of goods with characteristics similar to the value, to conclude on the most probable value of sale. The market study includes the following aspects: : • Investigation of records (actual sales, public records, etc.). • Research of offer values. • Professional criteria (financial entities, real estate brokers, etc.). • Interviews with owners. Limitations • Data problems: credibility, reliability, veracity. • Determination of a range of values

The Comparative Factors Method developed by the Technical Standardization Body (ONT) of the General Directorate of Direct Taxation (Real Estate Tax Law, Law 7509), was developed for tax purposes. In order to obtain the individual value of each land, it is necessary to use a series of particular variables of the farm and the area where the property to be valued is located, so that the value of a property can increase

Cost Approach.

It is based on the substitution principle, which establishes that no buyer duly aware of the general characteristics of a good would be willing to pay for it more than it would cost to replace it with another that provides a similar utility, it is applied to goods replaceable as for example valuation of facilities or improvements. The new replacement value, the replacement value and the net replacement value apply within this concept.

• When it comes to replacement value or new replacement value and the construction plans are not available, the minimum requirements established in the simplified design of the 2002 Seismic Code must be assumed, it is important to highlight that this design has its limitations which must be consulted in Chapter 17 of single-family housing. • In the case of net replacement value, it is necessary to assume the construction requirements minimum established by the Seismic Code in force one year of construction of the property. • In the case of structures higher than two levels, it is necessary to have construction plans. Otherwise, a budget cannot be drawn up and an estimate of the value will be made. • In the case of housing units, which it is necessary to acquire whose new replacement value is not enough to build the minimum established as social interest housing, according to guideline No. 27 of the Government of the Republic, the equivalent amount will be compensated to comply with this expectation.

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Income Approach.

This approach establishes that the value of a good at a certain date is equivalent to the present value of the income and future benefits that it will produce during its useful life of economic production.

Thank you for your attention.