What is rental method of valuation?

To pay MCG tax, my father had to visit the municipality office. He had to stand in long queues for hours to complete the payment process. But recently, he fell sick, and he is unable to do the same. I knew that my cousin had been paying the house tax online every year, so I asked him how to pay property tax online Gurgaon?

He informed me that he makes the payments through E-Wallets and that its very easy as well. Following that, he told me about the steps about how to pay Gurgaon property tax online. Let me share the steps;

How Can I Pay Property Tax Online In Gurgaon?

• He told me to open my preferred E-wallet. 

• Then, tap on the search bar and enter MCG. 

• Following that, he asked me to look among the options and choose the one that says Property Tax. . 

• Fill in details such as property ID, address, etc., and click on Continue or the similar option present there. 

• After this, I was asked to choose the preferred method of payment to complete the process. 

And that is how to pay property tax online in Gurgaon. He also told me that I could receive cashback and various coupon codes upon successful completion of the payment. I hope this process of how to pay property tax online Gurgaon has been helpful to you. 

I came to know about the rental valuation method when my father was talking to my uncle about it. So, I asked my father about what it ii. My father explained that the rental valuation method is a technique that is used to calculate the value of a property based on the sum of rent it brings in. 

He said there are various ways to calculate the value of a rental property. Among them he spoke about the five methods that are commonly used. 

What Are The Different Rent Valuation Methods?

• Capitalization Method

He explained that a property's capitalization rate is calculated based on the Net operating income and purchase price of the property. And thus, the rent capitalisation method of valuation is also known as the income approach. 

• Implicit Cost Method

After that, he told me about the Implicit cost approach. This method is used to calculate the values of properties where it is hard to find the latest sales and those that are not generating any income.  

• CAPM Method

This method is all about the relationship between investment risk and the expected return of an asset. The expected return is very similar to a risk-free return. CAPM means Capital Asset Pricing Model. 

• GRM Method

My father said that this method is the simplest when it comes to rent capitalization method valuation. GRM stands for Gross Rent Multiplier. 

• Sales Comparison Method

This method is preferred by real estate investors as they can determine the value of a property by comparing the sale value of similar projects, he said. This method is also known as the price per square foot method. 

I hope now the rental valuation method is clear to you. 

My renters questioned me this morning about the rental method of valuation. I did not have a proper idea about this. So, I researched online and discovered that the rental method of valuation is a technique that defines a property's value according to the sum of rent it brings in. This method is frequently used when valuing commercial properties, including office buildings, shopping centres, store outlets, and so on. Scroll down to know more details.

What is rental method of valuation of building?

The net revenue from the building is estimated using this method by subtracting all expenditures from gross rent. Each year's purchase (Y.P.) value is derived by considering an appropriate interest rate for the market. 

Let the interest rate be 10%; the year's purchase will be 100/10 = 10 years.

The formula to find out the rental income value is as follows:

Capitalised Value = Net Rent x Year Purchase = (Gross Rent - Expenses) x Year Purchase

Rental method of valuation example

Let’s understand this concept using an example. 

The gross rent of a property is Rs. 30,000/- per annum. If the deductions like maintenance charge and repair on the property rent are 5%. Find out the rental value of the property at 5% interest.

Given: Gross Rent = Rs. 30,000/- p.a.

Expense = 5% of Gross Rent = 5% of Rs. 30,000 = Rs. 1500/-

Therefore, the net rent collected per annum will be

Net Rent = Gross Rent - Expenses = Rs. 30,000 - Rs. 1500 = Rs. 28,500.

The year purchase will be equal to 100/5 = 20 years.

The capitalised value will be calculated using the formula given above.

Hence, Capitalised Value = Rs. 28,500 x 20 = Rs. 5,70,000/-

This is all about the valuation of rental property. If you have any more questions on the matter, just drop them in the comments below.