A common question we are asked here at Vanguard Valuations is this: How do we determine the true value of a property?
At Vanguard Valuations, we ensure all our reports are conducted in accordance with the International Valuation Standards, and as such, we employ a number of methodologies to value the property in question depending on the purpose for the valuation and the property type. These methods include:
Direct Comparison Approach
The Direct Comparison Method is based on the premise of comparing a subject property with other recent sales of similar properties on a “like for like” basis. It is the most commonly used method of valuation.
Capitalisation of Net Income Approach
The Capitalisation of Net Income Method is most commonly used with commercial and industrial properties and involves applying an acceptable cap rate to the income or rent on the property. This rent can either be determined via a current lease or by working out the fair market rent if a lease is not currently applicable to the property.
The Summation Method is the process of determining the underlying land value of a property and then adding the depreciated value of the improvements to give a total property value. It is most commonly used for freestanding commercial and residential properties and cannot be used for single lots in a strata.
Discounted Cash Flow
The Discounted Cash Flow method is a valuation methodology commonly used to find the value of a commercial asset (property or business) based on the predicted cash flow it will receive. The present value of expected future cash flows is determined by using a discount rate (determined by an experienced valuer) to calculate the discounted cash flow. If this rate arrives at above the current cost of the investment, then the investment is expected to make positive returns. Despite this method relying heavily on predictive data, an experienced valuer is able to interpret this information to provide sound advice on whether an investment is a good decision or not.
Our valuers will determine the most appropriate method(s) when valuing your property in order to report on the true market value of your asset. They are experts in their field and are unrivalled when it comes to providing you with a helpful and informative valuation report.
To enquire about your property valuation or for any general enquiries, please call us today and we will be happy to assist you.
The Team at Vanguard Valuations