1. Generic Questions - Vals

Question 1

What is the difference between an internal and external valuer?

Answer 1

Internal Valuer:
- Employed by company to value the assets of the company/enterprise
- Valuation for internal use only

External Valuer:
- No material links to the asset to be valued

Question 2

Describe under-, rack- and over-rented definitions

Answer 2

Under-rented: Passing rent below the market rent - potential for an increase

Rack-rented: Passing rent equal to the market rent - no expected change in the short term

Over-rented: Passing rent above the market rent - rent may fall at review or renewal, reducing the investment value

Question 3

How do you calculate WAULT?

Answer 3

Add all contracted rental income on the portfolio between now and the time the leases expire

Divided by the sum of the contract.

Expressed in number of years.

Question 4

Can you undertake a re-valuation of a property without re-inspection?

Answer 4

In accordance with VPS2 of the red book, you can revalue a property without reinspection providing you as the valuer are satisfied there has been no material change that will impact the property’s value.
* This should be stated in the Terms of Engagement and in the report.

Question 5

What must you consider when valuing a leasehold property?

Answer 5

Capitalise net rent (after ground rent reductions).
• Make appropriate adjustments to the yield for any increased risk associated with leasehold.
• A DCF might be used for depreciating asset.
• Rent – ground = net rental income.