Cost approach to real estate appraisal. Calculation of the full cost of reproduction (replacement) by the method of breakdown by components The costs of reproduction of the object of assessment are
The cost of replacing the building, excluding depreciation and obsolescence of a residential wooden house, with an area of 50 sq.m. calculated on the basis of the database published in the State Estimated Standards NCS 81-0201-2012. Section 1. Indicators of the enlarged standard for the price of construction,
Section 1. Residential buildings, low-rise estate type and townhouses,
Table 01-01-003 Wooden (from logs)
Meter: 1 m2 of the total area of a residential building
The NCS is calculated in prices as of January 1, 2012 for the base region (Moscow Region). Therefore, this indicator should be translated to today's date, for this we multiply by the price conversion index from January 1, 2012 to prices as of January 1, 2013, which is equal to 1.12 and the conversion coefficient from the prices of the base area to the price level of the constituent entities of the Russian Federation, which is equal to 0, 87.
To determine the cost of replacing a building without taking into account depreciation, the resulting figure must be multiplied by the area of \u200b\u200bthe house and by the investor's profit, which is 15%.
Thus, the cost of replacing a building, excluding wear and tear and obsolescence, is calculated by the formula:
– the cost of construction of 1 sq.m. in prices as of January 1, 2012. in the Moscow region, thousand rubles/sq.m.
Coefficient of price conversion from the prices of the base region (Moscow region) to the price level of the constituent entities of the Russian Federation
Thus, substituting the data for our object, we get:
RUB 4,173,525
11.3. Calculation of building replacement costs considering depreciation and obsolescence.
In order to determine the cost of replacement, taking into account wear and tear and obsolescence, it is necessary to multiply the replacement cost of the building by the wear factor:
The cost of replacing the building, taking into account wear and tear,
– the cost of replacing the building, excluding depreciation and obsolescence
I is the wear factor.
Depreciation is defined as a reduction in replacement cost due to various factors, obtained at the valuation date. There are three types of wear: physical wear, functional wear and wear of external influences.
Accumulated wear is determined by the formula
I - accumulated wear,
Physical deterioration,
functional wear
External wear
Physical deterioration() determined by the lifetime method
Depreciation Rate = Effective Age/Economic Life
For wooden houses, the economic life is 50 years,
The house was built in 2001, the effective age is 12 years
Then: \u003d 12/50 \u003d 0.24.
Signs of external and functional obsolescence were not found at the time of assessment, so their values are 0.
Thus, the accumulated depreciation is equal to:
Substituting the obtained values, we find the cost of replacing the building, taking into account wear and tear and obsolescence.
4 173 525 * 0,76= RUB 3,171,879
11.4. Calculation of the value of the object of assessment within the framework of the cost approach
The cost of an existing property is equal to the cost of land (land) plus the cost of erecting buildings and structures minus the accumulated depreciation of buildings and structures. This is a verbal description of the basic model of the cost approach. Mathematically, the basic model of the cost approach is as follows:
V = LV + IV - D ,
where V- the value of the property; LV- the cost of the land; IV- the cost of buildings and structures; D- accumulated (total) depreciation of buildings and structures.
Substituting in the formula the indicators calculated by us LV = 3 312 125 rub. in clause 11.1 and IV - D =3171879 in 11.3 we get:
V = 3 312 125 rub.+ 3 171 879 rub= 6 484 004 rub.
Thus, the market value of a land plot with a residential building, located at Krasnodar, st. Lenina, d. 62, obtained on the basis of the cost approach as of December 25, 2013, rounded is 6 484 004 (Six million four hundred eighty-four thousand four) rubles.
Calculation of the full cost of reproduction (full replacement cost) using the comparative unit method
The choice of a method for calculating the full cost of reproduction or the full cost of replacement requires some justification and depends on many factors: the purpose of the assessment, the quantity and quality of information collected about the object of assessment, its physical characteristics, etc.
It is more preferable to calculate the full cost of reproduction, since otherwise the costs for the construction of a building that differs from the estimated one in many respects are determined. At the same time, the assessment of the difference in the usefulness of the compared buildings is very subjective.
The choice to calculate the full replacement cost is justified if the property being valued shows signs of functional deterioration, which reduces the commercial attractiveness for a potential buyer.
The basis for determining the full cost of reproduction or the full replacement cost is the calculation of the costs associated with the construction of the facility and its delivery to the customer. Depending on the procedure for accounting for these costs, it is customary to allocate direct and indirect costs in the cost of construction.
Direct costs are costs directly related to construction. (A complete list of costs reflected in the cost price is given in the Standard Guidelines for Planning and Accounting for the Cost of Construction Works No. BE-11-260 / 7, approved by the Decree of the State Committee of the Russian Federation for Architecture and Construction dated December 4, 1995)
Direct costs include:
cost of building materials, products and equipment;
The wages of workers
the cost of construction-related structures and engineering networks;
the cost of utilities;
cost of delivery and storage of materials, etc.
Indirect costs - costs that are not directly related to construction:
the cost of investing in land;
fees to design and estimate organizations;
Overhead costs are also included as indirect costs.
Overhead costs - the funds necessary to create the general conditions for the construction industry, its organization and maintenance.
Developer's (investor's) profit is entrepreneurial income, which is a reward to the investor for the risk associated with the implementation of a construction project.
Consider the overall cost structure when calculating the full cost of reproduction (full replacement cost)
1. Construction and installation works
1.1. The cost of building materials, products and structures
1.2. Basic workers' wages
1.3. Operating costs (cost of utilities, operation of machines and mechanisms, delivery and storage of materials, etc.)
1.4. The cost of temporary structures and engineering networks associated with the construction
DIRECT COSTS
1.5. Overheads
CONTRACTOR COSTS
1.6. Contractor profit
CONTRACTOR PRICE (replacement cost of construction and installation works)
2. Cost of engineering equipment
3. Indirect costs of the investor
3.1. Land investment
3.2. Payment for the services of design and estimate organizations
3.4. Current expenses between the end of construction and the sale of the object
In the future, for the general designation of reproduction costs (reproduction costs) or replacement costs (replacement costs), we will use the term "replacement cost".
Despite the fact that this term is not currently defined as part of federal valuation standards, it is well known to appraisers as a concept that characterizes the value, which is used in the accounting of Russian organizations to account for the value of fixed assets.
Taking into account the accepted terminology, the process of determining the value of a property as a land plot with improvements can be described by the following expression:
- the value of the property being valued, rub.;
– cost of the land plot, rub.;
– replacement cost of improvements (reproduction cost or replacement cost), rub.;
– entrepreneurial income (developer's profit), rub.;
- accumulated depreciation of the property, rub.
In turn, the amount of accumulated depreciation is the sum of three components - physical depreciation, functional and external obsolescence:
- the amount of physical deterioration of improvements, rub.;
– functional obsolescence of improvements, rub.;
– external obsolescence of improvements, rub.
Taking into account the fact that when calculating the values of depreciation and obsolescence, the cost of construction, taking into account entrepreneurial income in monetary terms, can be used as a basis for calculation, we will additionally introduce the concept total replacement cost (PVC) as the sum of the cost of reproduction or replacement cost of improvements and the amount of entrepreneurial income calculated at the valuation date:
If the amount of entrepreneurial income is calculated not in monetary units, but in relative terms corresponding to the rate of return on investment, then expression (6.3) will take the following form:
(4)
7. Stages of real estate appraisal using the cost approach. In general, the valuation of a real estate object represented by a land plot with improvements (a building, structure or a group of construction objects) based on the cost approach includes the following steps:
1. Research of the real estate market with the definition of the main economic and consumer parameters of the segment to which the object of assessment belongs in accordance with the variant of its most effective use.
2. Collection and analysis of information about the technical, economic and other characteristics of the object of assessment and its environment.
3. Calculation of the cost of new construction (determination of the cost of reproduction or replacement) of improvements at the date of assessment.
4. Determination of entrepreneurial income on the basis of data on investments in the construction of real estate of the corresponding type.
5. Estimation of the amount of accumulated wear and tear of improvements, taking into account physical wear and tear, as well as functional and external obsolescence (if any).
6. Evaluation of the value of the land as free from improvements and available for the most efficient use.
7. Determination of the estimated value of the value of the property as the sum of the value of the land plot, replacement cost, increased by entrepreneurial profit and reduced by the amount of accumulated depreciation of improvements, taking into account the option for the most efficient use of the facility.
Like the comparative approach, the cost approach is based on the principle of substitution and is the most universal valuation method.
real estate.
The cost approach is a set of methods for estimating the value of the object of assessment, based on the determination of the costs necessary for the reproduction or replacement of the object of assessment, taking into account wear and tear and obsolescence.
Thus, the general formula for the cost approach to real estate valuation takes the form:
V= Сcreate- And, (19)
where Сcreat is the cost of creating a real estate object; And - the total depreciation of the object.
The cost of creating a property includes everything
the costs of its construction, while these costs can be of two types: the cost of reproduction or the cost of creation.
The cost of reproducing the appraised object is the cost required to create an exact copy of the appraised object with
using those used when creating the object of assessment
materials and technologies.
The costs of replacing the object of assessment are the costs necessary to create a similar object using materials and technologies in use at the date of assessment.
Regardless of the choice of reproduction or replacement costs, all costs are usually divided into the following groups:
Land costs;
Construction costs;
Entrepreneurship costs.
Thus, the formula for determining the cost of creating a real estate object can be written as:
Сcreate= Zzu+ Zstr+ Zpr, (20)
where Zzu - the cost of acquiring or renting a land plot;
Zstr - the cost of developing a project and building an object;
Zpr - the cost of entrepreneurial remuneration to the developer.
The cost of a land plot implies the acquisition of a vacant land plot for the construction of the object being assessed on it. If an already existing building is evaluated, then the land plot under it is evaluated as vacant, acquired for construction.
The cost of land can be calculated in several ways. Firstly, if there is a developed land market, then the value of a plot can be determined by a standard valuation procedure using income or comparative approaches.
Secondly, if the land market is in its infancy, and the land plot is leased from among state (municipal) lands, then it is possible to calculate the cost of the land plot using the methodology for calculating the amount of the redemption of the right to lease the land plot provided for the relevant purposes approved at the appropriate state level.
The third option can be implemented under the same conditions as the second, then it is possible to take the value of the cadastral value of the plot as the cost of acquiring a land plot,
determined in the process of the State cadastral valuation
The cost of the land plot under the assessed shopping center was calculated as the cost of buying out the right to lease, calculated according to the methods of the city government, and amounted to 38 million rubles.
Determination of construction costs is carried out in one of the four most common ways: the method of comparative
units, component breakdown method, quantitative method
examinations.
In our case, the comparative unit method is used, which involves the allocation of a comparison unit, which is usually chosen as either an area unit (1 m2) or a building volume unit (1 m3). After that, with the help of special reference literature, a similar building is selected and the cost of building a comparative unit of this building is determined.
The selection of the necessary reference information is carried out according to the presented indicators of analogue objects, their technical characteristics and structural elements that are closest to the object being evaluated.
When forming the full cost of construction of the object being evaluated, after choosing a reference cost indicator of a similar building, they are adjusted using the following coefficients:
On the difference in the structural elements of buildings;
On the difference in the volume of buildings;
For seismicity;
The amount of unforeseen costs;
On the regional difference in the price level;
On the zonal difference in the price level;
For price changes after the publication of the guide.
The total cost of construction of the object of assessment obtained in this way includes the costs of constructing the buildings themselves, supplying and connecting external engineering communications, landscaping and landscaping of the territory, calculated according to aggregated indicators. The cost of construction can be represented as the following formula:
Zstr= Zbaz* Kconstr* Cob* Xeism* CPR* K reg* K zones* kinf, (21)
where: Zbaz - the basic cost of building a similar building;
Кkonstr - coefficient of design differences; Cob - coefficient of differences in volume;
Kseism – seismicity coefficient;
Kpr - coefficient of other and unforeseen costs; Kreg - regional coefficient;
Кzon – zoning coefficient;
Kinf is the coefficient of inflationary price changes in construction.
The comparative unit method, due to its good combination of simplicity and accuracy, is currently the most commonly used method for calculating construction costs.
The base cost of building a shopping center similar to the one being assessed amounted to 39,000 rubles/m2, the coefficient
differences in volume - 0.95, coefficient of other and unforeseen costs - 1.14, inflation coefficient - 1.19. Thus, the construction costs of the estimated shopping center will be:
Zstr= 39000 * 0,95 *1,14 *1,19 * 9321 = 468492381 rub.
Entrepreneurship costs represent the necessary rate of return for the developer, calculated on the basis of market analysis, in the current conditions it is about 20%.
Thus, we have identified all types of costs attributable to the cost of creating an appraisal object. But the object of evaluation is not a new object, but has already passed some period of its service, for which the object has inevitably lost part of its value. To account for these losses, the cumulative wear is calculated.
Cumulative depreciation is the sum of three types of depreciation: physical, functional and economic:
And= If+ Them+ Yves, (22)
where: If - physical wear;
Im - functional (moral) depreciation; Iv - external (economic) wear.
Each type of depreciation reflects a decrease in the value of the object
real estate for various reasons. Physical depreciation is the depreciation of an object caused by the deterioration in the course of operation of its physical characteristics under
influence of natural and climatic factors, as well as
human life. The most common method for determining the amount of physical wear and tear is called the life method:
where: XB - chronological age; FZh - the term of physical life.
According to the above formula, the amount of physical depreciation is calculated as a percentage of the total cost of creation
the object being valued.
Functional depreciation (functional or technical obsolescence) - a decrease in the value of the assessed object due to inconsistency with the fashion (spirit of the times), lack or excess of something (for example, the heating system has lagged behind modern
standards, the foundations are more powerful than necessary, or the layout of the apartment provided for communal settlement, etc.). This type of wear mainly depends on the level of scientific and technological progress in industry, construction and architecture.
The cost expression of functional depreciation is the difference between the costs of reproduction and replacement costs, but this method of calculation is too laborious. Therefore, in practice, the method based on the capitalization of losses caused by the presence of functional wear is most often used:
And= PD, (24)
where: PD - loss of income caused by moral
(functional) depreciation of the assessed object.
Loss of income can be calculated by comparing the income received from the subject property with similar modern buildings that fully meet the requirements of users, i.e. with no moral (functional) wear and tear.
External obsolescence (external obsolescence, economic or locational obsolescence, or environmental obsolescence). For example, street congestion
road traffic, construction of environmentally harmful
enterprises near the object of assessment, economic decline in production,
Theoretically, the amount of external depreciation can be defined as the difference between the market value of the object and
the cost of creation, reduced by the amount of physical and
moral wear and tear. This method has little practical application, therefore, most often, external depreciation is calculated similarly to functional depreciation, with the only difference being that income losses caused precisely by economic depreciation are taken into account in the calculations.
Based on the fact that the causes of external wear and tear are in no way connected with the object being assessed, it can be argued that its elimination by the object owner in most cases is not possible. Thus, economic depreciation is only irreparable, but in some
In some cases, the influence that causes its presence may disappear under the influence of external causes.
The estimated shopping center was put into operation in 2008, so its chronological age is 4 years.
The standard service life of similar capital buildings is 75 years, therefore, the physical deterioration of the building
is 5.3%.
Given the recent commissioning of the facility and the absence of significant changes in the surrounding area, it can be stated that the assessed facility has no obsolescence and economic deterioration.
The calculation of the cost of the object by the cost method is made in table 15.
Table 15. Determining the value of a property using the cost method
The value of the appraisal object obtained by the cost method, taking into account rounding, will be
573 million 361 thousand rubles.