Ask The Experts - Surgery Market Value

Answer

I am often asked if it is possible to calculate an approximate Market Rent by applying a multiplier on the Notional Rent. The problem is that it would be too inaccurate and too approximate for any material purpose.

Firstly, an unqualified market value would, in addition to taking account of any surgery value, have regard to any alternate use value that the property may have, a factor which cannot be reflected by any simple multiplier. Secondly, it assumes that the Notional Rent is correct and fully up to date, which it may not be. Finally, the multiplier is derived from the yield that an investor would apply to the subject property which, in a changing market, can vary on a monthly basis and furthermore, for individual properties, has to take regard of numerous factors varying from age and quality to size and location. The result is that such a multiplier could easily vary from 11 to 16 and could even be outside of such a large range, which itself could alter by the time the valuation is required.