REVIEWER : FORMULA, RATES AND DUE DATES

1. LOCAL TAXATION
( Reference : Local Govt. Code)
REALTY TAX
o Market al!e " A##e##$ent Level % A##e##ed al!e
o Assessed Value x From 1% to 2% = Basic Realty Tax
Not to exceed 1% for provincial properties
Not to exceed 2% for all cities and MM municipalities
o Assessed Value x 1% !xed" = #$F Tax
o Assessed Value x Not to exceed %% = &dle 'and Tax
o Assessed Value ( )%*+ " x *,**% = #ociali-ed .ousin/ Tax RA
0201"
o )rompt )ayment 2iscount 3
Maximum of 2*% per '456 one time payment
&'E &ATE(
o Realty Tax ( may7e paid in a 8uarterly 7asis 9it:out interest
o 2ue dates 3 Marc: ;16 <une ;*6 #ept, ;*6 2ec ;1 of taxa7le year
Intere#t for late )a*$ent:
o 2% per mont: no surc:ar/e for unpaid realty tax"
o ;= mont:s> interest ? maximum interest for unpaid tax
o 1* years ? maximum tax for undeclared property
Intere#t for redee$ed )ro)ert* ( ta" del+n,!enc* #ale)
o 2% per mont:
TRAN(-ER TAX
o B&R Tax Base x 1% x %*% to 0%%
Not to exceed %*% for provincial properties
Not to exceed 0%% for all cities and MM properties
o 2ue 2ate
@it:in =* days from notari-ation of t:e sale
o )enalty and interest for late payment
2%% surc:ar/e of 7asic tax plus 2% interest per mont:
AnliBe B&R6 no compromise penalty
.'(INE(( TAX
o 4enerally su7Cect are corporations
o 5ities imposin/ 7usiness tax 3
D56 5aloocan6 )asi/6 Ta/ui/ and 'as )inas
No !xed formula in computin/ tax
o )aya7le 9it:in =* days from date of sale
o Basis is al9ays #$''&N4 )R&5$ liBe R$4&#TRAT&EN F$$ at t:e Re/, of
2eeds
o REMIN&ER 3 &f you are sellin/ real estate located at t:e a7ove places6
V$R&FF
at t:e Treasurer>s EGce !rst if t:e property is su7Cect to 7usiness tax
/. NATIONAL TAXATION
TAX .A(E +n (ale
o Market al!e of t0e )ro)ert* a# deter$+ned 1* t0e .IR
o OR (ell+n2 3r+ce4 56IC6EER I( 6IG6ER
50at +# Market al!e of .IR for t0e )ro)ert*7
o -or lot onl*
Market val!e of t0e a##e##or ( )er Ta" &eclarat+on ) or
.IR 8onal al!e4 90+c0ever +# 0+20er
o -or t0e +$)rove$ent
:!#t val!e )er ta" declarat+on at t0e t+$e of #ale4
donat+on4 e"c0an2e4
a##+2n$ent4 or at t0e t+$e of deat0 +n ca#e of e#tate ta"
MORE O-TEN T6AN NOT4 T0e Market al!e of t0e .IR +# t0e #!$ of:
8onal al!e for t0e lot and
Market al!e of I$)rove$ent )er Ta" &eclarat+on
&(T on (ale
o 1,%% x B&R Tax Base
&(T on Mort2a2e
o First )%+ H )2*,** plus
o )1*,** for every succeedin/ )%+ and fraction t:ereof OR
o #:ortcut 3 Amount of Mort/a/e x *,**2" I )1*,**
T:is is applica7le only if t:e !rst )%+ is still at )2*,** and
succeedin/ )%+ at )1*
Ca)+tal Ga+n# Ta"
o =% x B&R Tax Base for 5as: #ale and 2eferred )ayment #ale"
o =% x Amount Actually )aid for &nstallment #ale"
o To determine 9:et:er sale is installment or deferred3
&nitial payment J #ellin/ price = 2%% of #) or less installment
sale"
&nitial payment J #ellin/ price = if more t:an 2%% of #)
deferred payment sale"
o INITIAL 3AYMENT
is t:e total payments made 7y t:e 7uyer in one calendar year in
t:e year of sale
Cred+ta1le 5+t00old+n2 Ta"
o For dealer or developer .'ARB or .A255 re/istered"
1,%% x B&R Tax Base for )%**+ and 7elo9 #)"
;,*% x B&R Tax Base for over )%**+ to )2M"
%,*% x B&R Tax Base for over )2M"
o Not :a7itually en/a/ed in real estate 7usiness
=% x B&R Tax Base re/ardless of amount"
3ercenta2e Ta"
o ;% !xed" x Actual Business Receipts per mont:
al!e;added Ta"
o Eutput Tax = Amount Received 9it: VAT x 12J112 lia7ility of cas:
recipient"
o &nput Tax = Amount Received 9it: VAT x 12J112 deduction to
output tax"
o VAT )aya7le = Eutput less &nput Tax
A taxpayer subject to percentage tax need not pay additional VAT or a VAT
taxpayer need not pay additional percentage tax. However, if you are a
percentage taxpayer and you exceed your business receipts to
P1,919,!!.!!, even in t"e sa#e taxable year, your status will be converted
into a VAT taxpayer.
Applica7ility 3
o )ercenta/e tax if your /ross receipts is estimated at )161116%**,** and
7elo9 for one calendar year or
o VAT if your /ross receipts for one year is estimated to 7e more t:an
)161116%**,**
o AT;EXEM3T TRAN(ACTION(
&f seller is :a7itually en/a/ed in real estate 7usiness liBe dealers
and developers
For residential lot6
o #ellin/ price is 314<1<4=>>.>> and 7elo9 is
exempted
For residential :ouse and lot and residential condominium
o #ellin/ price is 3?41<<4/>>.>> and 7elo9 is
exempted
&onor@# Ta"
o From *% to 1%% x B&R Tax Base up to K
t:
de/ree of consan/uinity"
First )1**+ donation is exempted to donors tax
o Beyond K
t:
de/ree3 Fixed at ;*% x B&R Tax Base
o #on(in(la9 or dau/:ter(in(la9 is considered a stran/er
o 2onation s:ould 7e done in small amounts to save on taxes
E#tate Ta"
( General -or$!la for 0!#1and and 9+fe A co$$!n+t* )ro)ert*)
o 4ross $state
B&R FMV at t:e time of deat:( personal and real property" ?
say )1*M
o Allo9a7le 2eductions say
%M
o Net estate of :us7and and 9ife
%M
o 'ess3 %*% s:are of t:e survivin/ spouse
( 2,%M
o Net estate su7Cect to tax ( 3/.=M
o #ee ta7le for t:e tax
o L+#t# of allo9a1le ded!ct+on# (Ma"+$!$)
Medical $xpenses ( )%**6***,**
or actual expenses6 9:ic:ever is lo9er
Funeral $xpenses ( 2**6***,**
or %% of /ross estate6 or actual expenses6
9:ic:ever is lo9er
#tandard 2eduction F&L$2" (
16***6***,**
Family .ome ( 16***6***,**
or %*% of family :ome as determined 7y B&R6
9:ic:ever is 'E@$R
Et:er 8uali!ed deductions
5laims a/ainst t:e estate6 say loans6 unpaid taxes6 etc,
2onation to t:e /overnment t:ere s:ould 7e acceptance"
Vanis:in/ deduction
&'E &ATE(
o &(T on (ale and Mort2a2e
En or 7efore t:e =
t0
da* of t:e follo9in/ mont:
Basis is mont: of notari-ation
2#T on sale is not applica7le to 3
o &nstallment #ale or
o 2eferred )ayment #ale
T:ere s:ould 7e conveyance of o9ners:ip to 7e su7Cect to 2#T
on sale liBe3
2eed of #ale
2eed of #ale 9it: Mort/a/e
o Ca)+tal Ga+n# Ta"
5+t0+n ?> da*# from notari-ation of t:e sale for $LAM
)AR)E#$"
.E@$V$R6 some B&R examiners use date of sale or execution
date in actual practice ? T.$R$FER$6 expect t:e @ER#T in
practice"
M #AB#5R&B$2 AN2 #@ERN B$FER$ M$ , , , M execution is
notari-ation
o Cred+ta1le 5+t00old+n2 Ta"
En or 7efore t:e 1>
t0
da* of t:e follo9in/ mont:
Basis is mont: of notari-ation
o 3ercenta2e Ta" and al!e;added Ta"
En or 7efore t:e />
t0
da* of t:e follo9in/ mont:
&t is 7ased on actual cas: collections for t:e mont:
o &onor@# Ta"
@it:in ;* days from date of notari-ation
A5TAA' )RA5T&5$ 3 $xpect t:e 9orst ? date of donation
o E#tate Ta"
#:ould 7e !led and paid 3
@it:in = mont:s from t:e time of deat:
Notice of deat: 9it:in 2 mont:s from deat:
o Cert+Bcate A!t0or+C+n2 Re2+#trat+on (CAR)
#:ould 7e used 9it:in one year
'ife is 2 years includin/ revalidation #AM$ 5AR"
After 2 years6 if 5AR is not used6 t:en t:ere is R$(&##AAN5$ of
ne9 5AR
3O((I.LE TAXE( IN CA(E O- LATE 3AYMENT
o Basic B&R tax
o #urc:ar/e from 2%% to %*% in case of 9illful ne/lect"
o &nterest of 2*% interest per annum NE '&M&T"
o 5ompromise penalty
?. REGI(TER O- &EE&( ; -ee# to 1e )a+d
o Basic Re/istration Fee
#ellin/ )rice J 2*6*** x 1*" I )161K=,**
o Additional Fees
&nformation Tec:nolo/y Fee allot )16%**,** to )2+ per title"
Miscellaneous
$ntry Fee6 2#T6 Assurance Fund6 etc,
2ue 2ate
No due date 7ased on our actual practice
D. A((E((OR@( O--ICE
$xpenses for t:e cancellation of seller>s tax declaration and issuance of
ne9 tax declaration for t:e 7uyer is very minimal6 say );**,** to )%**,**
OT6ER -ORM'LA :
1, #8uare and Rectan/le = 'en/t: x @idt:
2, Trian/e = Base x .ei/:t Ri/:t An/le" J 2
;, Trape-oid = T:e sum of parallel lines x .ei/:t J 2
K, .ypotenuse = #8uare Root of t:e sum of 3 BA#$
2
I .$&4.T
2
"
%, Floor Area = 'en/t: x @idt:
=, Volume = 'en/t: x @idt: x .ei/:t
0, )ace Factor = Num7er of #teps J Actual 2istance
N, R:om7us = Base x .ei/:t
1, 1,** = 1**%
1*, *,2% = *,2% x 1**% = 2%%
11, O = *,2% or 2%%
12, P I P = 2J2 or 1,**
1;, P x P = O
1K, 1J 2 divided 7y P = P x 2J1 = 2J2 or 1,**
1%, #TA2F addition6 su7traction6 multiplication and division of fractions and
1= #TA2F conversion of decimal to percent and vice versa or fraction to decimal
to percent
1E. Conver#+on :
o 1 meter = ;,2N feet
o 1 meter = 1** centimeters
o 132** = 1 cm, in paper is = to 2** cms, in eart: surface
o 1 Bm, = 16*** meters
o 1 ares = 1** s8uare meters
o 1 centares = 1 s8uare meter
1F. -+nanc+n2 :
o 'oan Value 7ased on 5ollateral
o Appraised Value x 'oan to Value Ratio
o 'oan Value 7ased on 5apacity to )ay
o Mont:ly Amorti-ation J Mo, Amorti-ation Factor ER
o Mont:ly Amorti-ation x 35-
o Formula for )@F 3 #(1J#i "
o Mont:ly Amorti-ation = 'oan Value x M.A.-,
o Formula for M,A,F3 #iJ#(1"
Formula for S : ( 1 + i)
n
In#tall$ent (ale
1, #ellin/ )rice less 2o9npayment = Balance x MAF = M,A,
2, &nterest = )rincipal x Rate x Time
1G. 3a2;+1+2 -+nanc+n2
o AHorda1le 6o!#+n2 Loan Ref3 5ircular No, ;12 6 <uly 26 2*12"
o 'oan Amount Re8uired 5ontri7ution
)%**+ and 7elo9 )2**,**
Ever )%**+ to )=**+ 2%*,**
Ever )=**+ to )0**+ ;**,**
Ever )0**+ to )0%*+ ;%*,**
o Loan to A))ra+#al Rat+o (C+rc!lar ?1/)
1**% ( for loans up to )K**+ sociali-ed :ousin/"
1*% ( Ever )K**+ to )0%*+ economic :ousin/"
o Loan to A))ra+#al Rat+o (C+rc!lar ?1>)
1*% ( for loans of )162%*6***,** and 7elo9
N*% ( for loans over )162%*6***,** to )=M
o Loan A$ort+Cat+on .a#ed on Inco$e (C+rc!lar ?1/)
Mont:ly amorti-ation for loans of )0%*+ and 7elo9 3
s:ould not exceed ?=I of 4ross Mo, &ncome
NET$ 3 Ander C+rc!lar No. ?1> dated <une 16 2*126
mont:ly amorti-ation is 7ased on t:e follo9in/3
For loans of )162%*6***,** and 7elo93
o Not to exceed ?=I of Mo, 4ross &ncome
For loans over )162%*6***,** up to )=M
o Not to exceed ?>I of Mo, 4ross &ncome
o Loan Ent+tle$ent .a#ed on Mont0l* Inco$e
-or NCR A))l+cant#
Re8uired Mo, &ncome
o Ap to )1%+ per mont:
)K**+ loan and 7elo9
o Ap to )10,%+ per mont:
)0%*+ loan and 7elo9
-or Re2+onal A))l+cant#
Re8uired Mo, &ncome
o Ap to )12+ per mont:
)K**+ loan and 7elo9
o Ap to )1K+ per mont:
)0%*+ loan and 7elo9
Intere#t Rate#
)K%*+ and 7elo9 ( K,%% !xed for !rst 1* years
)0%*+ and 7elo9 ( =,%% !xed fort !rst 1* years
After 1* years6 a maximum increase of no more t:an
2%
1<. A))ra+#al
T0ree A))roac0e# to al!e
1. Market &ata or (ale# Co$)ar+#on or Co$)ara1le A))roac0
/. Co#t A))roac0
?. Inco$e A))roac0

1. Market &ata A))roac0:
3r+ce of Co$)ara1le ; 3"""""
3l!# or M+n!# AdJ!#t$ent# d!e to:
Ter$# of #ale
T+$e ele$ent
Locat+on and )0*#+cal c0aracter ;
"""""
al!e of #!1Ject )ro)ert* ; 3"""""
/. Co#t A))roac0
Re)lace$ent KRe)rod!ct+on Co#t Ne9 ;
3"""""
Le## : Accr!ed &e)rec+at+on ; """""
al!e of +$)rove$ent ; """"""
Add :
Land val!e ( 1* $arket data) ;
""""""
al!e of land and 1!+ld+n2 ; 3""""""
?. Inco$e A))roac0
General -or$!la : al!e % Inco$e K Rate
50ere : al!e +# Market al!e of #!1Ject )ro)ert*
Inco$e +# Net O)erat+n2 Inco$e for one *ear
Rate +# ca)+tal+Cat+on rate
Intere#t rate for land
Overall rate for +$)rove$ent
o ( +ntere#t rate L reca)t!re rate)
No reca)t!re )rov+#+on for land A not a
9a#t+n2 a##et

NOTE :
In INCOME A33ROAC64 !nder#tand and $e$or+Ce t0e fo!r (D) $at0
of +nve#t$ent for$!la :
( A 1 K (+ (3re#ent 5ort0 -actor -or$!la)
o A))l+ca1+l+t*
To convert #er+e# of +nco$e #trea$ +nto )re#ent val!e4
90ere #er+e# of +nco$e #0o!ld 1e e,!al +n a$o!nt#4 +f
not4 !#e &+#co!nted Ca#0 -lo9 ( 1K()
To convert #er+e# of #a*4 $ont0l* a$ort+Cat+on +nto
)re#ent loan val!e
E". Ca)ac+t* to )a*K$o. " 35- % Loan al!e
'#e t0+# +n
o .!+ld+n2 Re#+d!al Met0od; Ann!+t*
o 3ro)ert* Re#+d!al A Ann!+t*
o Lea#ed -ee E#tate al!e calc!lat+on
o (!1lea#e0old al!e calc!lat+on +f $arket rent
+# 0+20er t0an contract rent and t0e
d+Herence +# e,!al or con#tant ever* *ear
(+ K ( A 1 (A$ort+Cat+on -actor)
o A))l+ca1+l+t*
To deter$+ne t0e )er+od+c a$ort+Cat+on of a 2+ven loan
90ere +ntere#t +# 1a#ed on d+$+n+#0+n2 1alance of
)r+nc+)al
( ( -!t!re al!e -actor -or$!la)
o A))l+ca1le to all ann!+t* for$!la
1 K ( ( Rever#+on -actor -or$!la)
o A))l+ca1+l+t*
3ro)ert* Re#+d!al Met0od 1* Ann!+t*
Lea#ed -ee E#tate al!e
Lea#e0old al!e or #!1lea#e0old val!e
+f $arket rent +# 0+20er t0an contract rent and t0e
d+Herence 1et9een $arket rent and contract rent
+# not e,!al ever* *ear
-or &+#co!nted Ca#0 -lo9 (#er+e# of +nco$e or )a*$ent
var+e# ever* *ear)
T9o (/) 2eneral $et0od# +n +nco$e a))roac0
1, 2irect capitali-ation met:od
2, 2iscounted cas: Qo9
A))l+ca1+l+t* :
&+rect ca)+tal+Cat+on
o Onl* ONE YEAR +nco$e +# eno!20 and 1e+n2 ca)+tal+Ced to
val!e
&+#co!nted ca)+tal+Cat+on
o If )er+od+c +nco$e are not t0e #a$e and d+#co!nted +nto
)re#ent val!e
&IRECT CA3ITALI8ATION
50* d+rect ca)+tal+Cat+on7
It !#e# onl* one *ear +nco$e to arr+ve at t0e val!e of )ro)ert*
&I--ERENT MIN&( O- &IRECT CA3ITALI8ATION
1. Gro## Inco$e M!lt+)l+er Met0od ; ( !#e# co$)ara1le
)ro)ert* #old)
/. Gro## Rent M!lt+)l+er Met0od ; (!#e# co$)ara1le )ro)ert*
#old)
?. Re#+d!al Met0od# A (tra+20t L+ne
a. Land re#+d!al $et0od ; ( 1e2+n# 9+t0 NOI4 1!+ld+n2
+nco$e +# 2+ven)
7, Buildin/ residual met:od ( 7e/ins 9it: NE&6 land value is
/iven"
c, )roperty residual met:od ( neit:er land nor 7ld/, value is
/iven"
( simply use &N5EM$J EAR = VA'A$"
K, Residual Met:ods ? Annuity
a, 'and residual met:od ( uses Bld/, Value J )@F6 starts 9it: NE&"
7, Buildin/ residual met:od ( uses Bld/, &ncome x )@F6 starts
9it: NE&"
c, )roperty residual met:od ( uses )@F and Reversion Factor
1J#"
( same formula for 'eased Fee $state
1. GRO(( INCOME M'LTI3LIER MET6O&
o Ases t:e #ell+n2 )r+ce and eHect+ve 2ro## +nco$e of compara7le
property
o Formula 3 4&M = #) of compara7le J $4& of compara7le
o Value of #u7Cect )roperty 3
% GIM of co$)ara1le " EGI of #!1Ject )ro)ert*
/. GRO(( RENT M'LTI3LIER MET6O& ( Gro## Rent 3er Mont0)
o Ases t:e #ell+n2 )r+ce and 2ro## $ont0l* rental of compara7le
property
o Formula 3 4RM = #) of compara7le J 4ross mo, rent of compara7le
o Value of #u7Cect )roperty 3
% GRM of co$)ara1le " Gro## $o. rent of #!1Ject
)ro)ert*
?. RE(I&'AL MET6O&( A (TRAIG6T LINE
;a, Land Re#+d!al Met0od
Net Eperatin/ &ncome ( )xxxxxx
'ess 3 &ncome to Buildin/ ( xxxxx
EAR x Buildin/ Value"
&ncome attri7uta7le to t:e land ( xxxxxx
2ivided 7y 3 &nterest rate ( say =%
'and Value ( xxxxxx
Add3 Buildin/ Value ( xxxxxx
'and and Buildin/ Value ( )xxxxxx
;7, .!+ld+n2 Re#+d!al Met0od
Net Eperatin/ &ncome ( )xxxxxx
'ess 3 &ncome to 'and ( xxxxx
&nterest rate x 'and value"
&ncome attri7uta7le to t:e 7ld/, ( xxxxxx
2ivided 7y 3 Everall rate ( say N%
Buildin/ Value ( xxxxxx
Add3 'and Value ( xxxxxx
'and and Buildin/ Value ( )xxxxxx
?c. 3ro)ert* Re#+d!al Met0od
o NE& J EAR = Value
D. RE(I&'AL MET6O&( A ANN'ITY MET6O&
Da. Land Re#+d!al Met0od
Net Eperatin/ &ncome ( )xxxxxx
'ess 3 &ncome to Buildin/ ( xxxxx
Bld/, Value J )@F "
&ncome attri7uta7le to t:e land ( xxxxxx
2ivided 7y 3 &nterest rate ( say =%
'and Value ( xxxxxx
Add3 Buildin/ Value ( xxxxxx
'and and Buildin/ Value ( )xxxxxx
A#$ )@F TE BA&'2&N4 VA'A$ 5EM)ATAT&EN EN'F
D1. .!+ld+n2 Re#+d!al Met0od
Net Eperatin/ &ncome ( )xxxxxx
'ess 3 &ncome to 'and ( xxxxx
&nterest rate x 'and value"
&ncome attri7uta7le to t:e 7ld/, ( xxxxxx
Multiply 7y3 )@F ( xxxxxx
Buildin/ Value ( xxxxxx
Add3 'and Value ( xxxxxx
'and and Buildin/ Value ( )xxxxxx
A#$ )@F TE BA&'2&N4 VA'A$ 5EM)ATAT&EN EN'F
Dc. 3ro)ert* Re#+d!al Met0od
NE& x )@F = )resent Value of &ncome #tream use #(1J#i"
)lus 3 Reversion Value of #u7Cect )roperty use 1 J#"
$8uals 3 )roperty Value
o T.&# &# T.$ #AM$ FERMA'A &N 5EM)AT&N4 '$A#$2 F$$ $#TAT$
VA'A$
&I(CO'NTE& CA(6 -LO5
Ase Reversion Factor 1J#"
#ee our example at BooB 1

O3ERATING (TATEMENT
)otential 4ross &ncome )4&" say ( )2K6***6***,**
'ess 3
Allo9ance for vacancy and 7ad de7ts6 say 1*% ( 26K**6***,**
$Rective 4ross &ncome $4&" ( 216=**6***,**
'ess3 Eperatin/ $xpenses6 say ( =6KN*6***,**
N$T E)$RAT&N4 &N5EM$ 1 year" ( 31=41/>4>>>.>>
A##!$+n2 t0e ca)+tal+Cat+on rate +# 1>I
interest rate of N%
recapture rate of 2%
9:at is t:e value of land and 7uildin/ 7y income approac:S
al!e % 31=41/>4>>>.>> K 1>I or 31=14/>>4>>>.>>
6o9 to a))l* t0e +nco$e7
&ncome to land = 'and Value x N% Return EN "
&ncome to 7uildin/ = Buildin/ Value x N% Return EN "
Recapture of t:e 7uildin/ = 2% x Buildin/ Value Return EF"
E"a$)le :
'and Value is )1*6***6***,**
Brand ne9 7uildin/ value is )1K;62**6***,** 9it: estimated at %*(year life
Recapture rate = 1**% J %* years = 2%
&nterest rate = N%
5apitali-ation or Everall rate = 1*%
'and and Buildin/ is 31=?4/>>4>>>.>>
A))l+cat+on of Inco$e : (I- ITEMI8E&)
&ncome to land = ) 1*6***6***,** x GI = ) N**6***,**
&ncome to 7uildin/ = )1K;62**6***,** x N% = 116K%=6***,**
Recapture of t:e 7uildin/ = )1K;,2M x 2% = 26N=K6***,**
Total income NE&" = 31=41/>4>>>.>>
50at 9o!ld 1e t0e val!e of land and 1!+ld+n2 +f t0e NOI of 31=41/>4>>>.>>
9+ll 1e ca)+tal+Ced at 1>I7
Ans9er 3 VA'A$ = )1%612*6***,** J 1*% = )1%162**6***,**
A5TAA' 5E#T = = )1%;62**6***,**
2&FF$R$N5$ @.FS" = ) 26***6***,**
T:e reason is 3 @:en you directly divide t:e NE& to capitali-ation rate6 you
increase t:e denominator of t:e land 7y 2% ( instead of N% only it 7ecomes
1*%, T:e 7i//er t:e denominator t:e lesser t:e value,
Reca)t!re Rate
o 5ase 1
o Brand ne9 7uildin/6 estimated useful life %* years6 strai/:t line
met:od
o Recapture rate = 1**% J %* years = 2%
o 5ase 2
o Eld 7uildin/6 estimated remainin/ life 2% years6 strai/:t line met:od
o Recapture rate = 1**% J 2% years = K%
Accr!ed &e)rec+at+on Rate
o $Rective A/e J Aseful 'ife ER
o $Rective A/e J $Rective A/e I Remainin/ Aseful 'ife
o &n appraisal6 $Rective A/e is used instead of 5:ronolo/ical A/e or
Actual A/e
C!ra1le and Inc!ra1le &e)rec+at+on
o 5ura7le if 5ost to 5ure is 3
o $8ual or less t:an t:e increase in value
o &ncura7le if 5ost to 5ure is3
o More t:an t:e increase in value
o ):ysical depreciation
o can 7e cura7le or incura7le 9it:in t:e property"
o Functional o7solescence
o can 7e cura7le or incura7le 9it:in t:e property"
o $conomic o7solescence
o is al9ays incura7le depreciation outside t:e property"
Lea#e0old
o 'ease:old is positive if MarBet Rent is :i/:er t:an 5ontract Rent
o 'ease:old is ne/ative if MarBet Rent is lo9er t:an 5ontract Rent, T:e
excess is called excess rent or overa/e rent
A$ort+Cat+on -actor % ( + K ( ;1
o Loan al!e " A$ort+Cat+on -actor % 3er+od+c A$ort+Cat+on
o Applica7le to loan 9:ere interest is 7ased on diminis:in/ 7alance
&+#co!nt -actor or 3re#ent 5ort0 -actor % ( A 1K (+
o Applica7le in computin/ present value of an income stream
o if periodic payments are $DAA' &N AMEANT#
o Applica7le 9:en computin/ t:e 'oan Value of a 7orro9er 7ased on :is
capacity to pay
o 'oan Value = )eriodic )ayment x 2iscount Factor or )@F
Rever#+on -actor % 1 K (
o 5an 7e used in discounted cas: Qo9s 9:ere income streams are not
e8ual
-!t!re al!e -actor % ( K 1 or #+$)l* (
o .e+n2 !#ed +n all ann!+t* factor for$!la
LEA(E& -EE E(TATE -ORM'LA
#ame formula as )roperty Residual Met:od
NE& x )@F = )resent Value of &ncome #tream use #(1J#i" ( ) xxxxx
)lus 3 Reversion Value of #u7Cect )roperty use 1 J#" ( xxxxx
$8uals 3 )roperty Value ( ) xxxxxx
LEA(E6OL& -ORM'LA
MarBet Rent ( 5ontract Rent ( ) xxxxx
Multiply 7y3 )@F ( xxxxx
)resent Value of 'ease:old ( ) xxxxxx
Applica7ility 3
o &f periodic savin/s on rental are in $DAA' AMEANT# #(1J#i"
o &f periodic savin/s on rental are not e8ual6 use 2iscounted 5as: Flo9
1J#"
('.LEA(E6OL& -ORM'LA
(a$e 9+t0 Lea#e0old -or$!la
EXTRACTION O- INTERE(T RATE -ROM COM3ARA.LE ;
EXAM3LE
NE& of compara7le ( )K0%+
'ess 3 Recapture value per year of compara7le ( 0%+
o Buildin/ value J remainin/ useful life
o );M J K*yrs
$8uals 3 )ure income for land and 7uildin/ ( K**+
2ivided 7y 3 #ellin/ price of compara7le ( %M
$8uals 3 &nterest rate 7ased on marBet compara7le ( N%
COM3'TATION O- OERALL RATE
From marBet compara7le
o NE& of compara7le J #ellin/ )rice of compara7le
From Band of &nvestment Met:od
o #ee our example at BooB 1
&I--ERENT MET6O&( IN (ITE AL'ATION :
1. MARMET &ATA OR (ALE( COM3ARI(ON A33ROAC6
MarBet compara7le ( ) xxxxx
'ess or plus 3 AdCustments ( xxxxx
MarBet value of su7Cect property( ) xxxxx
/. EXTRACTION OR A.(TRACTION MET6O&
1, No vacant lot is availa7le as compara7le,
2, .o9 to compute for land residual value if compara7le is6 say6 :ouse and
lot,
;, 5ompute compara7le land valueS
AsBin/ price of :ouse and lot ( )%6***6***,**
'ess 3 Allo9ance for discount say 1*%" ( %**6***,**
$stimated cas: value of :ouse and lot ( K6%**6***,**
'ess 3
$stimated depreciated value of :ouse 7y cost approac:"
FA2** x R5N of )1%+Js8m x say at 0*%" ( 261**6***,**
$stimated land value residual" ( 26K**6***,**
E#t+$ated land val!e )er #,!are $eter
)26K**6***,** J 'A%**s8m," ( 3 D4G>>.>>
?. ALLOCATION MET6O&
E"a$)le 1:
1, #ellin/ price of :ouse and lot economic :ousin/" ( )16***6***,**
2, 'ot area is 1** s8m, 9:ic: is K*% of sellin/ price
?. T0erefore4 #ell+n2 )r+ce of lot )er #,$. +# :
)1M x K*% = ) )K**+ J 1** s8m, = ) K6***,**
E"a$)le /:
T:e ratio of land to 0o!#e is 13K, @:at is t:e value of land and t:e
7uildin/ if computed
separately usin/ t:e 13K ratio6 if t:e com7ined value is )%6***6***,**S
An#9er 3 'and = 1J% of )%M = )16***6***,**
Buildin/ value = KJ% of )%M = )K6***6***,**
Total % 3=4>>>4>>>.>>
D. GRO'N& RENT CA3ITALI8ATION MET6O&
(&+rect Ca)+tal+Cat+on) A Inco$e A))roac0
A##!$)t+on:
1, 'on/ term lease of land6 say 2% years 9it: option to rene9 after 2%
years
2, Mont:ly rental per s8uare meter ( )1%*,**
;, 'ot area is 26*** s8uare meters
K, &nterest rate on land capitali-ation rate" ? N%
%, Fearly operatin/ expenses is 2*% of t:e income
Co$)!te:
'and value 7y income approac: direct capitali-ation"
(ol!t+on:
Fearly income ( )1%* x 26***s8m, x 12 mont:s (
);6=**6***,**
'ess3 Eperatin/ expenses of say6 2*% (
02*6***,**
Net operatin/ income ( 26NN*6***,**
2ivided 7y3 5apitali-ation rate interest rate" (
N%TTTT
&ndicative land value ( );=6***6***,**
Land val!e )er #,$. ( 3?EM K /4>>>#,$.) ; 3
1G4>>>.>>
=. LAN& RE(I&'AL MET6O&
.* Inco$e A))roac0 (&+rect Ca)+tal+Cat+on)
A##!$)t+on :
1, Net operatin/ income of land and 7uildin/ ( ) 26=**6***,**
2, Buildin/ value depreciated value" ( 2*6***6***,**
;, Remainin/ economic life of t:e 7uildin/ ( 2% years
K, &nterest rate 7ased on marBet ( =%
%, 'ot area ( 16***s8m,
Co$)!te :
'and value 7y income approac: land residual met:od"
(ol!t+on:
Recapture rate 1**% J 2% years " ( K%
Add 3 &nterest rate ( =%
Everall rate or capitali-ation rate ( 1*%
Net Eperatin/ &ncome ( )
26=**6***,**
'ess 3 &ncome to 7uildin/ )2*M x 1*% " (
26***6***,**
Residual income for t:e land (
=**6***,**
2ivided 7y 3 &nterest rate ( =%TTT
$stimated land value (
)1*6***6***,**
E#t+$ated land val!e )er #,$. (31>M K 14>>>#,$.) 3
1>4>>>.>>
E. (TRI33ING MET6O&

G+ven:
T:e 1*(:ectare lot 9as 7ou/:t at )16***,** per s8uare meter
Asin/ t:e K(;(2(1 rule or t:e strippin/ met:od6
9:at are t:e values of eac: stripJs8m, assumin/ eac: strip :as an e8ual areaS
o 1
st
strip frontin/ t:e :i/:9ay
o 2
nd
strip 7acB of 1
st
strip
o ;
rd
strip
o K
t:
strip fart:est from t:e :i/:9ay"
An#9er :
o )urc:ase price = 1*:as, x 1*6***s8m, x )16***,** = )1**M
#:arin/ and values of eac: strip3
1
st
strip 3 )1**M x K*% J 2%6***s8m = ) 16=**,** or )16=**,** x KJK
= )16=**,**
2
nd
strip 3 )1**M x ;*% J 2%6***s8m = 162**,** or )16=**,** x U
= 162**,**
;
rd
strip 3 )1**M x 2*% J 2%6***s8m = N**,** or )16=**,** x 2JK
= N**,**
K
t:
strip 3 )1**M x 1*% J 2%6***s8m = K**,** or )16=**,** x O
= K**,**
TETA' = ) K6***,**
AV$RA4$ )R&5$J#DM,
o )K6***,** J K strips = )16***,**
NET$ 3
o K is K*% in relation to s:arin/ on purc:ase price
o K is KJK or 1**% in relation to t:e priceJs8m on 1
st
strip
o ; is U or 0%% in relation to t:e priceJs8m of 1
st
strip
GOO&5ILL COM3'TATION
#ay6 capitali-e 2*% of company>s NE& 7y say6 1*%
NE& is )2*6***6***,**
@:at is t:e amount of /ood9illS
Ans9er 3 )2*M x 2*%" J 1*% = )K*M
M'LTI3LE LINEAR REGRE((ION
Applyin/ t:e Multiple 'inear Re/ression formula y = aI 71 I x1 I 72 x2 I 7; x;
an analysis of compara7les in a nei/:7or:ood indicates t:e follo9in/ information3
Re/ression 5onstant )%**6***,**
'ivin/ Area 5oeGcient ) 06***,**Js8m,
2inin/ Area 5oeGcient ) 06***,**Js8m,
Bedroom 5oeGcient ) 1=*6***,** J 7edroom
Toilet JBat: 5oeGcient ) =*6***,** JTVB
4ara/e 5oeGcient ) 0*6***,** J 4ara/e
@:at is t:e estimated value of t:e su7Cect property 9:ic: consist of a ;(
7edroom6 2 toiletJ7at:6 ;*s8m, livin/Jdinin/ area 9it: a /ara/eS
An#9er :
Re/ression 5onstant ( )
%**6***,**
'ivin/ ? 2inin/ Area ) 06***,** x ;*s8m, (
21*6***,**
Bedroom ) 1=*6***,** x ; ( KN*6***,**
Toilet JBat: ) =*6***,** x 2 ( 12*6***,**
4ara/e ) 0*6***,** x 1 ( 0*6***,**
Value of property ( )16;N*6***,**
(TATI(TIC(
Mean ( avera/e
Median ( center or 2 centersJ2
Mode ( most num7er
A//re/ate ( total
Ran/e ( :i/:est less lo9est
&E3RECIATION COM3'TATION
#ee our examples at BooB 1
CON(EN'ENTIAL &AMAGE IN EX3RO3RIATION
Value 7efore expropriation or t:e value decided 7y court6 say6 )1*6***,**
'ess 3 Value of t:e unaRected portion of t:e property
o After expropriation say =6***,**
5onse8uential dama/e per s8m, ) K6***,**
(ELLING 3RICE K (NM 'N&ER 3& <=F
#)Js8m = Anit 5ost J Rate of unit cost in relation to #)
AN&T 5ost = Ac8uisition 5ostJs8m I 2ev 5ostJs8m
)ercenta/e of #alea7le Area
.AN& O- INE(TMENT MET6O&
Duestion 3 @:at is t:e indicative interest rate if recapture rate is K%
T:e 7anB is 9illin/ to /ive 0*% to t:e price of land and 7uildin/
T:e 7uyer s:all put t:e ;*% e8uity
&nterest rate t:e 7anB asBed is 12%
T:e 7uyer is satis!ed 9it: a 1*% return on :is e8uity
Ans9er 3 BanB 0*% x 12% = N,K*%
&nvestor ;*% x 1*% = ;,**%
Everall rate = 11,K*%
&nterest rate = 11,K*% ( K% = 0,K*%
CON('MER 3RO3ERTY IN&EX
Formula 3 al!e (C!rrent Year) = 5)& 5urrent Fear"
Value Base Fear" = 5)& Base Fear"
@:ere 3 5)& 2*1* = 1==,1*
5)& 2**% = 121,N*
$xample3
Ne9 t:res:old of B&R of real estate prices and residential rentals 7y t:ose
:a7itually en/a/ed in real estate 7usiness as dealers6 developers and lessors
eRective <anuary 16 2*12 per B&R Revenue Re/ulation ;(2*12 ? NET #AB<$5T
TE VAT
.a#ed on />1> C3I
Year />>= :an. 14 />1/
#ale of vacant lot )16%**6***,** )161116%**,** rounded"
#ale of res, 29ellin/ )26%**6***,** );61116%**,**
rounded"
Res, 'eases ) 1*6***,** ) 126N**,**
rounded"
4ross receipts 1yr," )16%**6***,** )161116%**,**
VAT Rate
Ap to <anuary ;16 2**= ( 1*%
Fe7ruary 16 2**= to present 2*12" ( 12%
5omputation3
Value 2*12 SS" = 1==,1*
)16%**6***,** = 121,N*
(ol!t+on : .* Cro## M!lt+)l+cat+on
Value 2*12 = 1==,1* x )16%**6***,** J 121,N* = 314<1<4D<1.=/
Value 2*12 = 1==,1* x )26%**6***,** J 121,N* = 3?41<<41=/.=D
Value 2*12 = 1==,1* x ) 1*6***,** J 121,N* = 31/4F<E.E1