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The income approach to property valuations: Implicit versus explicit models

3 Mar 2023 13:30 | Anonymous

This three-hour webinar is beneficial for real estate professionals (such as estate agents, valuers and advisors) and professionals who review valuations and property investors as it will advance their skills in the core methods used for the market valuation and investment appraisal of investment and commercial real estate. This is useful as commercial real estate valuation is a crucial element of the local real estate market but can be opaque and difficult to decipher.

Traditionally, commercial properties have been valued using the traditional capitalisation method. This is an inflation implicit valuation method where the rental value is divided by an all-risks yield (or cap rate) in order to obtain the Market Value.

However, the world is experiencing a shift towards the discounted cash flow method as it is an inflation explicit method which is more versatile which makes it able to cater for changing complexities in lease structures.

This shift has been slow in Malta as there remains a reluctance within the real estate sector to adopting valuation approaches in which these factors are made more explicit for a variety of reasons.

The webinar will discuss the key concepts and principles of the plethora of yields out there and of these two valuation methods, being the two main methods in the income approach. It will comment upon the on-going debate about the preferred use of the traditional method of valuation as opposed to their explicit (DCF) counterparts by giving an overview of the processes and pros and cons of both methods, and will give guidance about when to use both methods.


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