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Valuation Methods used in the Various Stages of a Construction Project Essay

The rating methods are carried out in the preliminary phases, during, and at the terminal of a undertaking. There are many methods of valuing belongings, besides each of the methods has its benefits and disadvantages. It changes depending on intents and demand of the belongings. For existent estate rating there are five methods are by and large accepted and each includes the usage of comparing to a lesser or greater scope.

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Following methods are by and large accepted in existent estate rating

  • Comparative method
  • Contractor ‘s method
  • Investing method
  • Residual method
  • Net incomes method

( RICS, n.d )

Comparative method

This rating method is accepted and normally used method, from this we can happen out the market monetary value of the belongingss. The chief undertaking is to consistently roll up informations on similar belongingss in the same location, happen out the factors which act uponing value and it should be evaluated against each other, both plus and dealing features considered under this method. ( Jordan lee & A ; Jaffar, 2014 ) .

Example

Mr. Peter is traveling to sell his 10 perches house which located at Havelock Street, Wellawata, Colombo – 06, utilizing dealing features method by seeking informations, that indicated that four similar houses on the same patio are sold for an sum between LKR 1,725,000.00 per perch and LKR 1,735,000.00 per perch while the terminal of patio house sold for LKR 1,750,000.00 per perch. All happened within the last four months. Another hunt utilizing assets features method would demo there were besides four similar patio houses sold on the analogue to Havelock Street for an sum between LKR 1,722,500.00 per perch and LKR 1,740,000.00 per perch. With this information, Mr. Peter can confidently presume that his house monetary value should be no less than LKR 1,722,000.00 and could perchance bring LKR 1,740,000.00

Contractor’s method

The contractor ‘s method is used for some belongingss a similar: – Public Sectors, Town Councils, Healthcare Providers, etc. which holding unique and specialised intents. Because of their alone nature which prevents them from valuing for commercial usage. ( De Carlon, n.d ) .

Below mentioned equation is the basic for the contractor ‘s method of rating

Value of Existing Property = ( De Carlon, n.d ) .

Example

Value of Existing Property =

=

= LKR 8, 700, 000.00

Investing method

Investing method is normally used by investor for gauging the investing belongingss which are used to bring forth income from gross revenues, rents, etc. to cipher the value of the belongings on the current market is cognizing the net income is which produced by the belongings. This is done combination with measuring the status of the belongings for possible redevelopment disbursals or future fix. ( De Carlon, n.d ) .

This investing method of rating is calculated by utilizing the output from the belongings, if the higher value of the output means return investing besides higher. ( Padraig Hyde & A ; Sons, n.d )

Example

When there is a belongings in market which has bespeaking monetary value of $ 300,000 and $ 700 of monthly rental income. So output of belongings will be 2.8 % . ( Padraig Hyde & A ; Sons, n.d )

In the market there is a belongings which inquiring for a monetary value of LKR 3, 500,000.00 and the monthly rental income is LKR 35,000.00, hence output of belongings is calculated by below mentioned method ;

Output of the property= x 100

= 12 %

Residual method

Residual method of rating is used to gauge the sum for edifices or land, which is to be developed or renovated. From the estimated sum investor can come to a decision that it is deserving puting for or non. ( ANON, 2014 ) .

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Below mentioned equation is the basic for the residuary method of rating ; –

Value of belongings in its present status = Value of completed undertaking – Total development cost. ( Padraig Hyde & A ; Sons, n.d )

To acquire more perfect value, it would be indispensable to include all expected depreciation and grasp cost in development one time finish deduct entire development costs such as revenue enhancements, funding and involvement cost and even the builder’s net income border that could would allow for exact residuary value of site to be obtained. ( Padraig Hyde & A ; Sons, n.d )

Example

There is a freshly constructed belongings which located at Havelock Street, Wellawata, Colombo -06, estimated sale monetary value for the belongings is LKR 10 million and the entire edifice cost is LKR 8 million, from this residuary value of site is calculated as LKR 2 million, say you are a belongings developer, if you bid above residuary value of site at sum of LKR 3 million, so you are certainly traveling to loss LKR 1 million.

4.3 ) Using an illustration of your pick, carry out a cost-benefit analysis. Interpret the consequences you obtained for practical usage.

Cost benefit analysis ( CBA ) it is a perfect method for determine how action program will turn out. Evaluation technique is comparing economic benefits with economic cost of the activity. The cardinal rule of cost benefit analysis ( CBA ) should supply benefit for the society greater than its cost. When several undertakings promise to give positive net benefits and when all can non be undertaken due to limited resources, the undertaking that creates the greatest net benefit to the society should be selected ( ANON, n.d )

Example

There is a two house undertakings shown at a lower place names as X and Y to transport out cost benefit analysis for this undertakings which based on comparing of hard currency flow.

Assumption ( 1LKR: 2,500 LKR )

House Ten

Year

1

2

3

4

5

6

7

Entire hard currency influx ( LKR )

150

200

260

330

370

385

420

430

Entire hard currency out flow ( LKR )

115

130

155

190

210

205

225

235

Net hard currency flow ( LKR )

35

70

105

130

160

180

195

200

Table 07- Net hard currency flow for house Ten

House Yttrium

Year

1

2

3

4

5

6

7

Entire hard currency influx ( LKR )

40

90

145

200

270

380

490

630

Entire hard currency out flow ( LKR )

55

85

120

145

180

240

260

280

Net hard currency flow ( LKR )

-15

5

25

55

90

140

230

350

Table 08- Net hard currency flow for house Yttrium

Figure 10 – Time versus Net hard currency flow chart

From this graph if we sing the house undertakings, house Ten is better than house Y it acquire the benefit fast in first 5 old ages but it change after 5Thursdaytwelvemonth and house Yttrium in the early phase less net income in 5 old ages and all of a sudden it increase after 5Thursdaytwelvemonth. So these X and Y house undertakings are good and we can acquire benefits as per this analysis. If house Ten besides can be selected they require benefit in the beginning, same as House Y besides be selected if they can set less net income in the beginning and can acquire greater net income after 5 old ages. Finally it is depends on their demand and their determination to take.

4.4 ) Using an illustration of your pick, explicate how income and outgo curves ( peculiarly the S-curve ) aid contractors command the undertaking cost. You are required to exemplify how a contractor can calculate cost deductions with the usage of S-Curve.

The S-curve is a powerful project direction control tool. It provides wide-ranging rating and shows a clear image of a undertaking procedure and its development. It is usage for detecting a undertaking procedure through known undertaking stages and to supervise phases of each stage, and besides it shows the resources connexions in term of different variables which are scaled as per centums ( % costs ) in relation to the clip variable, this relationships draw the future way to run into the undertaking aims and the concluding mark end, There are many different sorts of S-curves which are used for undertaking direction applications, such as: – Costss versus Time S-curve, Baseline S-curve, Actual S-curve, Target S-curve, Man Hours versus Time S-curve, Value and Percentage S-curves. Therefore analyses of S-curves allow undertaking directors to easy acknowledge undertaking growing, slippage, and possible jobs which would impact the undertaking.

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Figure 11 – S-curve ( Time versus Cost )

As per the above mentioned illustration, S-curve indicate that the undertaking is behind the agenda and over cost at the point of T1. At the point T1 we can clearly place that existent cost work performed ( ACWP ) is greater than budgeted cost of work performed ( BCWP ) , hence Cost Variance ( CV ) is unfavourable for the contractor, and besides we can place that budgeted cost of work scheduled ( BCWS ) is greater than budgeted cost of work performed ( BCWP ) hence Schedule Variance ( SV ) is unfavourable for the contractor. From these we can understand there is an impact on hard currency flow. If we sing cost discrepancy ( CV ) it is unfavourable for the contractors, it may go on by the monetary value fluctuation or wastage of resources or fluctuations or over disbursals or fast on the job procedure. If the monetary value fluctuation and fluctuation occurred during the undertaking period the contractor can claim those excess money of existent outgo but the extra money is lesser than the existent outgo eventually the contractor have to confront the fiscal job. ( For an illustration: -for a undertaking budgeted cost for an activity is 4 million USD and Actual Cost is 7 million USD but fluctuation is 1 million USD so contractors put 2 Million USD from his pocket. It will take him to fiscal jobs ) . If we sing schedule discrepancy ( SV ) it is besides unfavourable for the contractor. It may go on hold in work force, machineries and stuffs there will be opportunity for low craft & A ; quality, because clip hold contractor have pay the punishment at terminal he have to confront the jobs and losingss

Decision

From the S-curve analysis contractor can calculate the cost deduction and he can understand how much cost in future, and he can command cost efficaciously for the undertaking. So he can command cost of the undertaking by using accomplishment labors and staffs with efficient cognition in direction and supervising, cut downing the wastage, etc. eventually when the contractor did proper prediction cost deduction and proper cost control are finished throughout whole undertaking with the aid of S-curve he can acquire much benefits at completion of undertaking.

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Valuation Methods used in the Various Stages of a Construction Project Essay
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The rating methods are carried out in the preliminary phases, during, and at the terminal of a undertaking. There are many methods of valuing belongings, besides each of the methods has its benefits and disadvantages. It changes depending on intents and demand of the belongings. For existent estate rating there are five methods are by and large accepted and each includes the usage of comparing to a lesser or greater scope.

Following methods are by and large accepted in existent est

2018-10-21 01:45:22
Valuation Methods used in the Various Stages of a Construction Project Essay
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