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REAL ESTATE VALUATION METHODS |
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11/03/2006 |
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1. Replacement Cost (Price Per Square Foot) |
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3. Appreciation Extrapolation |
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Asking/Offer Price |
$400,000 |
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Fair Value Price |
$195,000 |
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Total Square Feet |
1972 |
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Fair Value Year |
1994 |
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Asking/Offer Price Per Square Foot |
$203 |
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Current Year |
2006 |
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Price Per Square Foot of New Construction (Average is $115) |
$115 |
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Years of Appreciation |
12 |
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Lot Land Cost of New Construction (If Not Already Included) |
$30,000 |
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Annual Appreciation % (3.5% Historical) |
3.5% |
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New Construction Price Total |
$256,780 |
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Offer Price |
$294,658 |
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Asking/Offer Price vs. New Construction Price $ |
$143,220 |
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Asking/Offer Price vs. New Construction Price % |
156% |
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4. Assessed Value Plus Margin |
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2. Rental (Cash Flow, Return on Price, Price/Earnings Ratio) |
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Assessed Value |
$125,000 |
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Margin % (15% Typical) |
15% |
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Cost |
Monthly |
Annual |
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Offer Price |
$143,750 |
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Mortgage |
$2,000 |
$24,000 |
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Taxes |
$100 |
$1,200 |
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5. Redbrick's Formula - (Annual Gross Rent / 2) / Price = Yield |
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HOA Fees |
$100 |
$1,200 |
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Insurance |
$100 |
$1,200 |
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Monthly Rent (Gross) |
$2,000 |
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Repairs/Maintenance |
$100 |
$1,200 |
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Annual Rent (Gross) |
$24,000 |
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Utilities |
$100 |
$1,200 |
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Price |
$400,000 |
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Other (Vacancy/Collection Loss, Management, etc.) |
$100 |
$1,200 |
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Yield (Target is 5% to 7% or More) |
3.00% |
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TVM Loss on Down Payment |
$83 |
$1,000 |
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* 1/2 Rent = Expenses. |
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Total |
$2,683 |
$32,200 |
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* Works best for properties under $250,000. |
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Monthly Rent (Gross) |
$2,500 |
$30,000 |
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Net Cash Flow |
$(183) |
$(2,200) |
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Price |
$400,000 |
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Return on Price (Annual Cash Flow / Price) (Target is 5% to 7% or More) |
-0.55% |
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Price/Earnings Ratio (Monthly) (Target is 240 to 1) |
-2181.82 |
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Price/Earnings Ratio (Annual) (Target is 20 to 1) |
-181.82 |
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Price |
$400,000 |
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Price/Rent Ratio (Monthly) (Target is 150 to 1) |
200.00 |
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Price/Rent Ratio (Annual) (Target is 12 to 1) |
16.67 |
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