CONSTRUCTION COST TO VALUE PART 3 – 3

When there is no evidence of comparable sales.

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3. Construction cost
This method is mostly utilised for the purposes of cross referencing when there is a lack of
or no evidence of recent sales or comparable sales. This method can also be utilised for
projected sales of a future development.

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Residential Value
Example only:
Land value $300,000 for a total of a 700 m2 lot
Description,3 bedroom home, level land, single level home, internal area of 220 m2.
Quality of finish does not include external areas such as gardens and fencing.
Low quality                  Medium                            High
$1,200 m2                   $ 1,350 m2                       $ 1,700 m2
$264,000                     $297,000                          $374,000
Land cost

$300,000                     $300,000                          $300,000
Total

$564,000                     $597,000                          $674,000

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Commercial value
Example only:
Land value $500,000 for a total of a 850 m2 lot
Description, single level commercial property, level land, internal area of 400 m2
Quality of finish will not include internal fit out for potential tenancy.
Low quality                   Medium                           High
$1,900 m2                   $2,150 m2                       $2,400 m2
$760,000                     $860,000                         $960,000
Land cost

$500,000                    $500,000                           $500,000
Total

$1,260,000                 $1,360,000                        $,1460,000

at 7% respectively

$ 88,200 net               $ 95,200 net                      $102,200 net

Real estate formulas such as Capitalisation rates are formulas utilised to arrive at asking rentals and Capital selling prices.

 

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Once again we do not except any responsibility for the above examples and urge people to seek professional advise if required. The above information has been illustrated for simple explanation only regarding the three most common methods of valuing real estate.

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