EXAMPLES

A. Valuation of Freehold Interests

Value the freehold interest in a double storey detached house built in 1990. It was recently let at a
rental of RM 1,200 per month with the owner liable for all outgoings. ransactions of similar
properties showed that the pre!ailing rate of return is "#. he following information has also been
obtained.
$nnual Value %$V& ' RM 10,"00
Rates ' (# of $V
Repairs ' RM 2,"00 p.a.
)ire insurance premium ' RM *0 p.a.
+uit rent ' RM 100 p.a.
Rental Value RM 1,200 , 12 -. -.. RM 1*,*00 p.a.
LESS:
Outgoing
Rates RM 10,"00 . (# RM (*0
Insurance RM *0
Management "# of RM1*,*00 RM /20
Repairs RM 2,"00
+uit Rent RM 100
RM
*,200 p.a.
0et Income RM 10,200 p.a.
12 in perpetuity . "# 20
.
. . 3apital !alue of )reehold Interest RM 20!000
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". Valuation of Leasehold Interests
Value the leasehold interest in a double storey detached house on the same street as in 4,ample
$ which is held under a lease for / years since 200* at a rental of RM (,500 p.a. he lessee had
recently let the house at a rental of RM 1*,*00 p.a. he lessee is liable for all outgoings. 6ther
information are as follows7
$V ' RM 10,"00
Rates ' (# of $V
Repairs ' RM 1,"00 p.a.
Insurance ' RM *0 p.a.
+uit rent ' RM 100 p.a.
Valuation7
Rent Recei!able RM 1*,*00 p.a.
8ess7
Rent 2ayable -. -. RM (.500 p.a.
2rofit Rent %9ross Income& RM :,100 p.a.
LESS: Outgoing
Rates RM 10,"00 . (#..RM (*0
+uit rent RM 100
Insurance RM *0
Repairs RM 1,"00
Management "# RM /20 RM 5,200 p.a.
0et Income RM 2,900 p.a.
12 for 5 years . /# ; 5# 2."*11.
3apital !alue of 8easehold Interest RM #!$%&
0<7 he leasehold interest will e,pire in year 2011, i.e., in 5 years from now %200(&
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'. Valuation of Freehold Interest (ith a ter) and re*ersion.
=hat is the !alue the freehold interest in the same property as in %<&. $ssume that the landlord is
liable for all outgoing upon re!ersion %and pro!ided that the e,isting condition remains the same&.
Valuation7
Terms:
Rent Recei!able for ne,t 5 years RM (,500 p.a.
12 for 5 years . " ># 2.:9/9 RM 22,592
Reversion:
)ull Rental Value RM 1*,*00 p.a.
8ess
6utgoings %as in 4,ample <& RM 5,200 p.a.
0et Rent RM 11,200 p.a.
12 in perp. deferred 5 years . :# 15.995? RM 1":./21
Value of )reehold Interests RM 1/9.115
Sa+ RM ,#&!000
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0<7 he income during the term is capitaliAed at a slightly lower rate than pre!ailing for full
rental !alue. he reasons for this includes the fact that the rent is secured as it is much
less than the actual marBet rate, in such ad!antageous position the tenant is unliBely to
default. If it happens that the tenant forfeit the lease, an increase %in rent& is obtainable.
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