- How to calculate the market value of a completed asset?
Different approaches are utilized depending on the characteristics of the asset such as:
- Market Comparison approach
- Asset Valuation approach
- Capitalization Rate approach
- Income approach
2. How to discount the developer’s profit?
- It requires forecasting and modeling of the expected sales cycles of the project. The associated cash flows will be discounted at a Discount rate which will be the risk-free cost of capital + risk premium associated with the project.
3. I have a land and I have just applied for building rights, can I use GDV-based valuation?
- No, in this case just getting the right to undergo/pursue the development is a negligible effort compared to the entire development, hence valuation should/must be computed as Land value + cost incurred for application.
