Home  Journals  Financial Analytics: Science and Experience  9(21) - 2009 September

About the Recurrent Equation for the Capitalization Rate of the Net Operational Income from Real Estate Rent

Available online: 11 November 2009

Subject Heading: INVESTMENT VALUE OF THE PROPERTY

JEL Classification: 

The method of direct capitalization for defining the investment cost of real estate is considered. The capitalization rate can be calculated from the earlier defined fundamental recurrent equation, which suggests the knowledge of net operational income. The formula of Gordon was suggested as a limit term for the fundamental recurrent equation. It follows from the stationery terms that the discount rates and post-prognoses exchange rate of the net operational income are dependable and they can not be chosen at random. In this connection the article shows how the discount rate should be chosen in post-prognoses period depending on the growth rate. It enables to get relevant methods for the prognostication of the capitalization.

Keywords: Real estate, evaluation, market, value, profitable, approach, method, direct capitalization of profit, discount rate, capitalization rate, net operational income

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ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

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