Net asset value method - when it comes to content values
What is the substance value method? The definition
Die Substance-value method, also Tangible value or Real value method called, is a valuation method for real estate that Reconstruction value of a building as well as the Land value focuses on. Different from the Income value method, which is based on expected returns, the net asset value method is particularly suitable for properties that are not used for income purposes. These include historic buildings such as castles or public buildings such as train stations. In addition, the asset value method is often used as Business valuation used when fixed assets consist primarily of real estate.
When is the substance value method appropriate?
The net asset value method is suitable for properties that are difficult to compare or special. Unlike with the Income value method, which is aimed at income, the net asset value method takes into account the Restoration costs and the current Land value. The following types of real estate are typical:
Use cases:
- Historic buildings: Castles, palaces and listed properties
- Public buildings: Train stations, schools and similar facilities
- Properties difficult to compare: Single-family houses in rural areas or special properties
Calculation of the substance value
With the net asset value method, the real estate value is composed of Construction value of the plant, the Value of other investments and the Land value. The value of the property is determined using the following calculation:
- The Value of the building is added to the value of other investments and the land value.
- In addition, there are value-enhancing measures such as Renovations or expansions.
- The is deducted age-related impairment of the property and the loss of value due to defects.
- In addition, a Market adjustment value continue to adjust the value of the property to the conditions of the current real estate market.
Steps to determine the substance value
- Calculate construction value
The construction value is often calculated by multiplying the Price per cubic meter comparable building calculated with the volume of the object. The calculation also takes into account Age devaluation, which can be set using construction cost indices or with the assistance of an architect. - Set land value
The land value is usually determined by comparative values of similar plots of land in the same location. Information on prices per square meter is available from municipal or building authorities. - Determine substance value
The net asset value is obtained by adding construction value and land value. The inclusion of a second evaluation method can increase the significance of this calculation.
Advantages and disadvantages of the asset value method
advantages:
- Ideal for listed properties or properties that are difficult to compare
- Considers Conversion, expansion and renovation costs
- Adapts to that current price level the production costs of
Disadvantages:
- that Market activity is disregarded
- Requires comprehensive expertise in the construction sector, which makes the calculation complex
The net asset value method provides a reliable valuation basis for specific types of real estate, which are difficult to compare with other methods due to their special features.
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