real estate finance - full book (500 pgs)

What is the capitalization rate interest first

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Unformatted text preview: approaches are applicable to all types of properties, income capitalization is applicable only to investment real estate which is capable of producing money income and where the motivation of the buyers is a return on investment including income tax considerations. Income capitalization is the process of converting a series of anticipated future periodic installments of net income to their present worth or value. The use of income capitalization in real estate valuation is based on the premise that value is the present worth of anticipated or forecast future benefits in the form of money income. Income capitalization differs from gross income multiplier analysis (discussed below) in that net income, rather than gross income, is processed to a value estimate. Valuation is undertaken from the viewpoint of the typical informed investor and is based on the money income produced by the property. The market is stratified into comparable, competitive investments. Investment Principles – Investment analysis is essentially a matter of determining who gets what, and when. It points out the amount and timing of anticipated income, receipts, and expenses. 12-10 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 12: QUALIFYING THE PROPERTY • More is preferable to less for income. The reverse is true for expenses and capital outlays. The investor would prefer to receive $5,000 rather than $500 on an investment Sooner is preferable to later for income. The reverse is true for expenses and capital outlays. Because a dollar received today is worth more than a dollar received a year from now, the investor prefers to receive income from the investment as soon as possible. The investor's primary concern is to maintain capital intact. This is return of investment, and means that the entire amount of the original investment is returned to the investor. The investor typically seeks a profit or gain on the investment, in additi...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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