Real estate valuation in Bali

Commercial real estate valuation

Comparative approach

First of all, the value of commercial real estate is determined by the market value, that is, the most likely sale price that a typical investor is willing to pay. The sales comparison approach is most useful when there are several properties similar to those that have recently been sold, as is usually the case with single-family homes.

A costly approach

With the cost approach, the cost is determined by adding the cost of land to the cost of a new building, minus adjustments for estimated depreciation and obsolescence. The cost approach is often used for unusual properties where comparable transactions are limited.

Profitable approach

The cost is based on the expected profit required by the buyer to invest in the assessed property, which also allows you to determine the payback period. The income approach uses two methods of estimating the value of real estate: the direct capitalization method and the discounted cash flow method.

Example of valuation and return on investment in real estate:

To compare the relevance of prices, we recommend using the application booking.com:

1.Log in to the booking app on your smartphone or to the website booking.com

2.In the window where you want to go, specify Bali, Changu ;

3.In the filter on the left, select the 5 stars option.

L8 Resort Hotel Apartments
$ 4,023 per month

Apartments

Canvas Village Resort Seminyak

$ 4,239 per month

Umalas Apartments
$ 3,911 per month

4.As a result, you will see an average price of $ 169 per day, i.e. $ 5068 per month and $60,816 per year.

5.Consider the cost of marketing (booking in booking ...) 15% of revenue - $ 9,122.
Income before taxes and expenses for the management company will amount to $51,693

6.Take into account the 11% tax of $5,686. The income after tax will be $46,000.

7. Finally, take into account the costs of the management company, which will be up to 30% of the income. $ 13,802 and you will have a net profit of $ 32,200
At the same time, the expenses for the management company can be 20% and at the same time, if you wish, you can manage your objects yourself.

8. Determine the rental income:

divide the received income of $ 32,000 by the amount of investment. For example, you bought an object for $200,000 and expect an annual income of $32,000. Divide $32,000 by $200,000 and the yield will be 16% per annum (capitalization rate).

Or divide $200,000 by $32,000 and you will see that the investment will pay off due to rental income for 6.5 years.

9. Make a conclusion from the point of view of rental income:

The average international capitalization rate is up to 5%, while the official capitalization rate in Indonesia is 8%, and the calculated object has a capitalization rate of 16% and a payback period of 6.5 years.

Those we understand that the price of $ 200,000 is a favorable price for the purchase of this object.

In addition, the annual increase in land and real estate prices in Indonesia exceeds 12%.

10. Determine the income from the sale:

It is estimated that this object can be sold twice as high.

At the same time, we look at the secondary market and determine that this object can be sold 30% higher on the secondary market.