VALUATION THEORY AND MORTGAGE-EQUITY ANALYSIS

THE OVERALL RATES IN REAL ESTATE APPRAISAL ARE DISCUSSED AND THREE METHODS OF DETERMINING MORTGAGE-EQUITY OVERALL RATE ARE DESCRIBED. THEY ARE, THE BAND-OF-INVESTMENT METHOD, THE INVESTOR'S METHOD AND THE ELLWOOD METHOD. MORTGAGE EQUITY ANALYSIS IS DEFINED AND THE ASPECTS OF RISK, RISK-ADJUSTED DISCOUNT RATE IN THE REAL ESTATE MARKET, PARALLELS IN VALUATION THEORY, AND RISK RETURN TRADEOFF ARE REVIEWED. A TABLE ILLUSTRATING NET OPERATING INCOME AND NET INCOME THEORIES IS PRESENTED. DETAILS ARE GIVEN OF TRADITIONAL VALUATION THEORY, AND AN EXHIBIT ILLUSTRATES THE BEHAVIOR OF DEBT AND EQUITY REQUIREMENTS AND OVERALL RATES UNDER CERTAIN THEORIES OF VALUATION. THE ISSUE OF TRADEOFF BETWEEN RISK AND RETURN IS OUTLINED, AND INFLUENCE OF DEBT FINANCING ON VALUATION IS DISCUSSED. THE EMPIRICAL QUESTION OF DEBT FINANCING ON REAL ESTATE VALUES IS CONSIDERED. CONCLUSIONS BASED ON THIS REPORT ARE PRESENTED.

  • Corporate Authors:

    American Institute of Real Estate Appraisers

    155 East Superior Street
    Chicago, IL  USA  60611
  • Authors:
    • Cunningham, T M
  • Publication Date: 1974-4

Media Info

  • Features: Figures; Tables;
  • Pagination: p. 188-99
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00239017
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jun 11 1974 12:00AM