REVIEWER : FORMULA, RATES AND DUE DATES

1. LOCAL TAXATION ( Reference : Local Govt. Code)

REALTY TAX o Market Value x Assessment Level = Assessed Value

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% (fixed) = SEF Tax

o Assessed Value x Not to exceed 5% = Idle Land Tax

o ( Assessed Value - P50K ) x 0.005 = Socialized Housing Tax (RA 7279)

o Prompt Payment Discount : Maximum of 20% per LGC, one time payment

DUE DATES o Realty Tax - maybe paid in a quarterly basis without interesto Due dates : March 31, June 30, Sept. 30, Dec 31 of taxable year

Interest for late payment:o 2% per month ( no surcharge for unpaid realty tax)o 36 months’ interest – maximum interest for unpaid taxo 10 years – maximum tax for undeclared property

Interest for redeemed property ( tax delinquency sale)o 2% per month

TRANSFER TAX o BIR Tax Base x 1% x 50% to 75%

Not to exceed 50% for provincial properties Not to exceed 75% for all cities and MM properties

o Due Date Within 60 days from notarization of the sale

o Penalty and interest for late payment 25% surcharge of basic tax plus 2% interest per month Unlike BIR, no compromise penalty

BUSINESS TAX o Generally subject are corporations o Cities imposing business tax :

QC, Caloocan, Pasig, Taguig and Las Pinas No fixed formula in computing tax

o Payable within 60 days from date of saleo Basis is always SELLING PRICE like REGISTRATION FEE at the Reg. of Deeds

o REMINDER : If you are selling real estate located at the above places, VERIFY at the Treasurer’s Office first if the property is subject to business tax

2. NATIONAL TAXATION

TAX BASE in Saleo Market Value of the property as determined by the BIR o OR Selling Price, WHICHEVER IS HIGHER

What is Market Value of BIR for the property?o For lot only

Market value of the assessor ( per Tax Declaration ) or BIR Zonal Value, whichever is higher

o For the improvement Just value per tax declaration at the time of sale, donation, exchange,

assignment, or at the time of death in case of estate tax

MORE OFTEN THAN NOT, The Market Value of the BIR is the sum of: Zonal Value for the lot and Market Value of Improvement per Tax Declaration

DST on Sale o 1.5% x BIR Tax Base

DST on Mortgage o First P5K @ P20.00 pluso P10.00 for every succeeding P5K and fraction thereof ORo Shortcut : (Amount of Mortgage x 0.002) + P10.00

This is applicable only if the first P5K is still at P20.00 and succeeding P5K at P10

Capital Gains Tax o 6% x BIR Tax Base ( for Cash Sale and Deferred Payment Sale)o 6% x Amount Actually Paid (for Installment Sale)o To determine whether sale is installment or deferred:

Initial payment / Selling price = 25% of SP or less ( installment sale) Initial payment / Selling price = if more than 25% of SP (deferred payment sale)

o INITIAL PAYMENT is the total payments made by the buyer in one calendar year in the year of sale

Creditable Withholding Taxo For dealer or developer (HLURB or HUDCC registered)

1.5% x BIR Tax Base ( for P500K and below SP) 3.0% x BIR Tax Base (for over P500K to P2M) 5.0% x BIR Tax Base (for over P2M)

o Not habitually engaged in real estate business 6% x BIR Tax Base (regardless of amount)

Percentage Taxo 3% (fixed) x Actual Business Receipts per month

Value-added Taxo Output Tax = Amount Received with VAT x 12/112 (liability of cash recipient)o Input Tax = Amount Received with VAT x 12/112 ( deduction to output tax)o VAT Payable = Output less Input 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 P1,919,500.00, even in the same taxable year, your status will be converted into a VAT taxpayer.

Applicability :o Percentage tax if your gross receipts is estimated at P1,919,500.00 and below for one

calendar year or

o VAT if your gross receipts for one year is estimated to be more than P1,919,500.00

o VAT-EXEMPT TRANSACTIONS If seller is habitually engaged in real estate business like dealers and developers

For residential lot, o Selling price is P1,919,500.00 and below is exempted

For residential house and lot and residential condominiumo Selling price is P3,199,200.00 and below is exempted

Donor’s Taxo From 0% to 15% x BIR Tax Base ( up to 4th degree of consanguinity)

First P100K donation is exempted to donors tax

o Beyond 4th degree: Fixed at 30% x BIR Tax Base o Son-in-law or daughter-in-law is considered a strangero Donation should be done in small amounts to save on taxes

Estate Tax ( General Formula for husband and wife – community property)

o Gross Estate ( BIR FMV at the time of death- personal and real property) – say P10M

o Allowable Deductions say 5Mo Net estate of husband and wife 5Mo Less: 50% share of the surviving spouse - 2.5Mo Net estate subject to tax - P2.5Mo See table for the tax

o Lists of allowable deductions (Maximum) Medical Expenses - P500,000.00

or actual expenses, whichever is lower Funeral Expenses - 200,000.00

or 5% of gross estate, or actual expenses, whichever is lower

Standard Deduction (FIXED) - 1,000,000.00 Family Home - 1,000,000.00

or 50% of family home as determined by BIR, whichever is LOWER

Other qualified deductions Claims against the estate, say loans, unpaid taxes, etc. Donation to the government (there should be acceptance) Vanishing deduction

DUE DATESo DST on Sale and Mortgage

On or before the 5th day of the following month Basis is month of notarization DST on sale is not applicable to :

o Installment Sale oro Deferred Payment Sale

There should be conveyance of ownership to be subject to DST on sale like: Deed of Sale Deed of Sale with Mortgage

o Capital Gains Tax Within 30 days from notarization of the sale ( for EXAM PURPOSE)

HOWEVER, some BIR examiners use date of sale or execution date (in actual practice – THEREFORE, expect the WORST in practice)

“ SUBSCRIBED AND SWORN BEFORE ME . . . “ execution is notarization

o Creditable Withholding Tax On or before the 10th day of the following month

Basis is month of notarization

o Percentage Tax and Value-added Tax On or before the 20th day of the following month It is based on actual cash collections for the month

o Donor’s Tax Within 30 days from date of notarization ACTUAL PRACTICE : Expect the worst – date of donation

o Estate Tax Should be filed and paid :

Within 6 months from the time of death Notice of death within 2 months from death

o Certificate Authorizing Registration (CAR) Should be used within one year Life is 2 years including revalidation (SAME CAR) After 2 years, if CAR is not used, then there is RE-ISSUANCE of new CAR

POSSIBLE TAXES IN CASE OF LATE PAYMENTo Basic BIR taxo Surcharge from 25% to 50% ( in case of willful neglect)o Interest of 20% interest per annum (NO LIMIT)o Compromise penalty

3. REGISTER OF DEEDS - Fees to be paido Basic Registration Fee

( Selling Price / 20,000 x 90) + P1,146.00o Additional Fees

Information Technology Fee (allot P1,500.00 to P2K per title) Miscellaneous

Entry Fee, DST, Assurance Fund, etc. Due Date

No due date based on our actual practice

4. ASSESSOR’S OFFICE Expenses for the cancellation of seller’s tax declaration and issuance of new tax declaration

for the buyer is very minimal, say P300.00 to P500.00

OTHER FORMULA :

1. Square and Rectangle = Length x Width 2. Triange = Base x Height (Right Angle) / 23. Trapezoid = The sum of parallel lines x Height / 24. Hypotenuse = Square Root of the sum of : ( BASE2 + HEIGHT2 )5. Floor Area = Length x Width 6. Volume = Length x Width x Height7. Pace Factor = Number of Steps / Actual Distance8. Rhombus = Base x Height

9. 1.00 = 100% 10. 0.25 = 0.25 x 100% = 25%11. ¼ = 0.25 or 25%12. ½ + ½ = 2/2 or 1.0013. ½ x ½ = ¼14. 1/ 2 divided by ½ = ½ x 2/1 = 2/2 or 1.00

15. STUDY addition, subtraction, multiplication and division of fractions and 16 STUDY conversion of decimal to percent and vice versa or fraction to decimal to percent

16. Conversion :o 1 meter = 3.28 feeto 1 meter = 100 centimeterso 1:200 = 1 cm. in paper is = to 200 cms. in earth surfaceo 1 km. = 1,000 meterso 1 ares = 100 square meterso 1 centares = 1 square meter

17. Financing :o Loan Value based on Collateral

o Appraised Value x Loan to Value Ratio

o Loan Value based on Capacity to Payo Monthly Amortization / Mo. Amortization Factor ORo Monthly Amortization x PWF o Formula for PWF : (S-1/Si )

o Monthly Amortization = Loan Value x M.A.F. o Formula for M.A.F: ( Si/S-1)

Formula for S : ( 1 + i)n

Installment Sale1. Selling Price less Downpayment = Balance x MAF = M.A.2. Interest = Principal x Rate x Time

18. Pag-ibig Financing

o Affordable Housing Loan (Ref: Circular No. 312 , July 2, 2012)o Loan Amount Required Contribution

P500K and below P200.00 Over P500K to P600K 250.00 Over P600K to P700K 300.00 Over P700K to P750K 350.00

o Loan to Appraisal Ratio (Circular 312) 100% - for loans up to P400K (socialized housing) 90% - Over P400K to P750K (economic housing)

o Loan to Appraisal Ratio (Circular 310) 90% - for loans of P1,250,000.00 and below 80% - for loans over P1,250,000.00 to P6M

o Loan Amortization Based on Income (Circular 312) Monthly amortization for loans of P750K and below :

should not exceed 35% of Gross Mo. Income

NOTE : Under Circular No. 310 dated June 1, 2012, monthly amortization is based on the following:

For loans of P1,250,000.00 and below:o Not to exceed 35% of Mo. Gross Income

For loans over P1,250,000.00 up to P6Mo Not to exceed 30% of Mo. Gross Income

o Loan Entitlement Based on Monthly Income For NCR Applicants

Required Mo. Income o Up to P15K per month

P400K loan and belowo Up to P17.5K per month

P750K loan and below For Regional Applicants

Required Mo. Income o Up to P12K per month

P400K loan and belowo Up to P14K per month

P750K loan and below

Interest Rates P450K and below - 4.5% fixed for first 10 years P750K and below - 6.5% fixed fort first 10 years After 10 years, a maximum increase of no more than 2%

19. Appraisal

Three Approaches to Value1. Market Data or Sales Comparison or Comparable Approach2. Cost Approach3. Income Approach

1. Market Data Approach:

Price of Comparable - PxxxxxPlus or Minus Adjustments due to:

Terms of sale Time element Location and physical character - xxxxx

Value of subject property - Pxxxxx

2. Cost ApproachReplacement /Reproduction Cost New - PxxxxxLess : Accrued Depreciation - xxxxxValue of improvement - xxxxxxAdd :Land value ( by market data) - xxxxxxValue of land and building - Pxxxxxx

3. Income ApproachGeneral Formula : Value = Income / Rate

Where : Value is Market Value of subject property Income is Net Operating Income for one year Rate is capitalization rate

Interest rate for land Overall rate for improvement

o ( interest rate + recapture rate) No recapture provision for land – not a wasting asset

NOTE :

In INCOME APPROACH, understand and memorize the four (4) math of investment formula :

S – 1 / Si (Present Worth Factor Formula)o Applicability

To convert series of income stream into present value, where series of income should be equal in amounts, if not, use Discounted Cash Flow ( 1/S)

To convert series of say, monthly amortization into present loan value Ex. Capacity to pay/mo. x PWF = Loan Value

Use this in o Building Residual Method- Annuityo Property Residual – Annuityo Leased Fee Estate Value calculationo Subleasehold Value calculation if market rent is higher than

contract rent and the difference is equal or constant every year

Si / S – 1 (Amortization Factor)o Applicability

To determine the periodic amortization of a given loan where interest is based on diminishing balance of principal

S ( Future Value Factor Formula)o Applicable to all annuity formula

1 / S ( Reversion Factor Formula)o Applicability

Property Residual Method by Annuity Leased Fee Estate Value Leasehold Value or subleasehold value

if market rent is higher than contract rent and the difference between market rent and contract rent is not equal every year

For Discounted Cash Flow (series of income or payment varies every year)

Two (2) general methods in income approach1. Direct capitalization method2. Discounted cash flow

Applicability : Direct capitalization

o Only ONE YEAR income is enough and being capitalized to value Discounted capitalization

o If periodic income are not the same and discounted into present value

DIRECT CAPITALIZATION

Why direct capitalization? It uses only one year income to arrive at the value of property

DIFFERENT KINDS OF DIRECT CAPITALIZATION

1. Gross Income Multiplier Method - ( uses comparable property sold)2. Gross Rent Multiplier Method - (uses comparable property sold)

3. Residual Methods – Straight Linea. Land residual method - ( begins with NOI, building income is given)b. Building residual method - ( begins with NOI, land value is given)c. Property residual method - ( neither land nor bldg. value is given)

- ( simply use INCOME/ OAR = VALUE)4. Residual Methods – Annuity

a. Land residual method - (uses Bldg. Value / PWF, starts with NOI)b. Building residual method - (uses Bldg. Income x PWF, starts with NOI)c. Property residual method - (uses PWF and Reversion Factor (1/S)

( - same formula for Leased Fee Estate

1. GROSS INCOME MULTIPLIER METHODo Uses the selling price and effective gross income of comparable propertyo Formula : GIM = SP of comparable / EGI of comparableo Value of Subject Property :

= GIM of comparable x EGI of subject property

2. GROSS RENT MULTIPLIER METHOD ( Gross Rent Per Month)o Uses the selling price and gross monthly rental of comparable propertyo Formula : GRM = SP of comparable / Gross mo. rent of comparableo Value of Subject Property :

= GRM of comparable x Gross mo. rent of subject property

3. RESIDUAL METHODS – STRAIGHT LINE

3a. Land Residual MethodNet Operating Income - PxxxxxxLess : Income to Building - xxxxx

( OAR x Building Value)Income attributable to the land - xxxxxxDivided by : Interest rate - say 6%Land Value - xxxxxxAdd: Building Value - xxxxxxLand and Building Value - Pxxxxxx

3b. Building Residual MethodNet Operating Income - PxxxxxxLess : Income to Land - xxxxx

( Interest rate x Land value)Income attributable to the bldg. - xxxxxxDivided by : Overall rate - say 8%Building Value - xxxxxxAdd: Land Value - xxxxxxLand and Building Value - Pxxxxxx

3c. Property Residual Method

o NOI / OAR = Value

4. RESIDUAL METHODS – ANNUITY METHOD

4a. Land Residual MethodNet Operating Income - PxxxxxxLess : Income to Building - xxxxx

( Bldg. Value / PWF )Income attributable to the land - xxxxxxDivided by : Interest rate - say 6%Land Value - xxxxxxAdd: Building Value - xxxxxxLand and Building Value - Pxxxxxx

USE PWF TO BUILDING VALUE COMPUTATION ONLY

4b. Building Residual MethodNet Operating Income - PxxxxxxLess : Income to Land - xxxxx

( Interest rate x Land value)Income attributable to the bldg. - xxxxxxMultiply by: PWF - xxxxxxBuilding Value - xxxxxxAdd: Land Value - xxxxxxLand and Building Value - Pxxxxxx

USE PWF TO BUILDING VALUE COMPUTATION ONLY

4c. Property Residual MethodNOI x PWF = Present Value of Income Stream (use S-1/Si)Plus : Reversion Value of Subject Property (use 1 /S)Equals : Property Value

o THIS IS THE SAME FORMULA IN COMPUTING LEASED FEE ESTATE VALUE

DISCOUNTED CASH FLOW Use Reversion Factor ( 1/S) See our example at Book 1

OPERATING STATEMENT

Potential Gross Income (PGI) say - P24,000,000.00Less : Allowance for vacancy and bad debts, say 10% - 2,400,000.00Effective Gross Income (EGI) - 21,600,000.00Less: Operating Expenses, say - 6,480,000.00NET OPERATING INCOME ( 1 year) - P15,120,000.00

Assuming the capitalization rate is 10% interest rate of 8% recapture rate of 2% what is the value of land and building by income approach?

Value = P15,120,000.00 / 10% or P151,200,000.00

How to apply the income? Income to land = Land Value x 8% (Return ON ) Income to building = Building Value x 8% (Return ON ) Recapture of the building = 2% x Building Value (Return OF)

Example : Land Value is P10,000,000.00 Brand new building value is P143,200,000.00 with estimated at 50-year life Recapture rate = 100% / 50 years = 2% Interest rate = 8% Capitalization or Overall rate = 10% Land and Building is P153,200,000.00

Application of Income : (IF ITEMIZED) Income to land = P 10,000,000.00 x 8% = P 800,000.00 Income to building = P143,200,000.00 x 8% = 11,456,000.00 Recapture of the building = P143.2M x 2% = 2,864,000.00

Total income (NOI) = P15,120,000.00

What would be the value of land and building if the NOI of P15,120,000.00 will be capitalized at 10%?

Answer : VALUE = P15,120,000.00 / 10% = P151,200,000.00ACTUAL COST = = P153,200,000.00DIFFERENCE (WHY?) = P 2,000,000.00

The reason is : When you directly divide the NOI to capitalization rate, you increase the denominator of the land by 2% - instead of 8% only it becomes 10%. The bigger the denominator the lesser the value.

Recapture Rateo Case 1

o Brand new building, estimated useful life 50 years, straight line methodo Recapture rate = 100% / 50 years = 2%

o Case 2o Old building, estimated remaining life 25 years, straight line method

o Recapture rate = 100% / 25 years = 4%

Accrued Depreciation Rateo Effective Age / Useful Life ORo Effective Age / Effective Age + Remaining Useful Lifeo In appraisal, Effective Age is used instead of Chronological Age or Actual Age

Curable and Incurable Depreciationo Curable if Cost to Cure is :

o Equal or less than the increase in value

o Incurable if Cost to Cure is:o More than the increase in value

o Physical depreciation o can be curable or incurable (within the property)

o Functional obsolescence o can be curable or incurable (within the property)

o Economic obsolescenceo is always incurable depreciation (outside the property)

Leaseholdo Leasehold is positive if Market Rent is higher than Contract Rento Leasehold is negative if Market Rent is lower than Contract Rent. The excess is called

excess rent or overage rent

Amortization Factor = S i / S -1o Loan Value x Amortization Factor = Periodic Amortizationo Applicable to loan where interest is based on diminishing balance

Discount Factor or Present Worth Factor = S – 1/ Si o Applicable in computing present value of an income stream

o if periodic payments are EQUAL IN AMOUNTS

o Applicable when computing the Loan Value of a borrower based on his capacity to payo Loan Value = Periodic Payment x Discount Factor or PWF

Reversion Factor = 1 / S o Can be used in discounted cash flows where income streams are not equal

Future Value Factor = S / 1 or simply So Being used in all annuity factor formula

LEASED FEE ESTATE FORMULA Same formula as Property Residual Method

NOI x PWF = Present Value of Income Stream (use S-1/Si) - P xxxxxPlus : Reversion Value of Subject Property (use 1 /S) - xxxxxEquals : Property Value - P xxxxxx

LEASEHOLD FORMULAMarket Rent - Contract Rent - P xxxxxMultiply by: PWF - xxxxxPresent Value of Leasehold - P xxxxxx

Applicability : o If periodic savings on rental are in EQUAL AMOUNTS (S-1/Si)o If periodic savings on rental are not equal, use Discounted Cash Flow (1/S)

SUBLEASEHOLD FORMULA Same with Leasehold Formula

EXTRACTION OF INTEREST RATE FROM COMPARABLE - EXAMPLE NOI of comparable - P475K Less : Recapture value per year of comparable - 75K

o Building value / remaining useful lifeo P3M / 40yrs

Equals : Pure income for land and building - 400K

Divided by : Selling price of comparable - 5M Equals : Interest rate based on market comparable - 8%

COMPUTATION OF OVERALL RATE From market comparable

o NOI of comparable / Selling Price of comparable From Band of Investment Method

o See our example at Book 1

DIFFERENT METHODS IN SITE VALUATION :

1. MARKET DATA OR SALES COMPARISON APPROACH

Market comparable - P xxxxx Less or plus : Adjustments - xxxxx Market value of subject property - P xxxxx

2. EXTRACTION OR ABSTRACTION METHOD

1. No vacant lot is available as comparable. 2. How to compute for land residual value if comparable is, say, house and lot. 3. Compute comparable land value?

Asking price of house and lot - P5,000,000.00Less : Allowance for discount ( say 10%) - 500,000.00Estimated cash value of house and lot - 4,500,000.00Less :

Estimated depreciated value of house ( by cost approach) ( FA200 x RCN of P15K/sqm x say at 70%) - 2,100,000.00Estimated land value (residual) - 2,400,000.00

Estimated land value per square meter( P2,400,000.00 / LA500sqm.) - P 4,800.00

3. ALLOCATION METHOD

Example 1:1. Selling price of house and lot (economic housing) - P1,000,000.002. Lot area is 100 sqm. which is 40% of selling price

3. Therefore, selling price of lot per sqm. is :P1M x 40% = P P400K / 100 sqm. = P 4,000.00

Example 2:The ratio of land to house is 1:4. What is the value of land and the building if computedseparately using the 1:4 ratio, if the combined value is P5,000,000.00?

Answer : Land = 1/5 of P5M = P1,000,000.00 Building value = 4/5 of P5M = P4,000,000.00 Total = P5,000,000.00

4. GROUND RENT CAPITALIZATION METHOD (Direct Capitalization) – Income Approach

Assumption: 1. Long term lease of land, say 25 years with option to renew after 25 years

2. Monthly rental per square meter - P150.00 3. Lot area is 2,000 square meters 4. Interest rate on land (capitalization rate) – 8%

5. Yearly operating expenses is 20% of the income

Compute: Land value by income approach (direct capitalization)

Solution:Yearly income - P150 x 2,000sqm. x 12 months - P3,600,000.00Less: Operating expenses of say, 20% - 720,000.00Net operating income - 2,880,000.00Divided by: Capitalization rate (interest rate) - 8%____ Indicative land value - P36,000,000.00Land value per sqm. ( P36M / 2,000sqm.) - P 18,000.00

5. LAND RESIDUAL METHOD By Income Approach (Direct Capitalization)

Assumption : 1. Net operating income of land and building - P 2,600,000.00

2. Building value (depreciated value) - 20,000,000.00 3. Remaining economic life of the building - 25 years 4. Interest rate based on market - 6%

5. Lot area - 1,000sqm.

Compute : Land value by income approach (land residual method)

Solution:Recapture rate ( 100% / 25 years ) - 4%

Add : Interest rate - 6%Overall rate or capitalization rate - 10%Net Operating Income - P 2,600,000.00 Less : Income to building ( P20M x 10% ) - 2,000,000.00Residual income for the land - 600,000.00Divided by : Interest rate - 6%___ Estimated land value - P10,000,000.00Estimated land value per sqm. (P10M / 1,000sqm.) P 10,000.00

6. STRIPPING METHOD

Given: The 10-hectare lot was bought at P1,000.00 per square meter Using the 4-3-2-1 rule or the stripping method,

what are the values of each strip/sqm. assuming each strip has an equal area?o 1st strip fronting the highwayo 2nd strip (back of 1st stripo 3rd strip o 4th strip (farthest from the highway)

Answer :o Purchase price = 10has. x 10,000sqm. x P1,000.00 = P100M

Sharing and values of each strip: 1st strip : P100M x 40% / 25,000sqm = P 1,600.00 or P1,600.00 x 4/4 = P1,600.00

2nd strip : P100M x 30% / 25,000sqm = 1,200.00 or P1,600.00 x ¾ = 1,200.00 3rd strip : P100M x 20% / 25,000sqm = 800.00 or P1,600.00 x 2/4 = 800.00

4th strip : P100M x 10% / 25,000sqm = 400.00 or P1,600.00 x ¼ = 400.00 TOTAL = P 4,000.00 AVERAGE PRICE/SQM.

o P4,000.00 / 4 strips = P1,000.00

NOTE : o 4 is 40% in relation to sharing on purchase priceo 4 is 4/4 or 100% in relation to the price/sqm on 1st stripo 3 is ¾ or 75% in relation to the price/sqm of 1st strip

GOODWILL COMPUTATION Say, capitalize 20% of company’s NOI by say, 10% NOI is P20,000,000.00 What is the amount of goodwill? Answer : (P20M x 20%) / 10% = P40M

MULTIPLE LINEAR REGRESSIONApplying the Multiple Linear Regression formula y = a+ b1 + x1 + b2 x2 + b3 x3 an analysis of comparables in a neighborhood indicates the following information:

Regression Constant P500,000.00Living Area Coefficient P 7,000.00/sqm.Dining Area Coefficient P 7,000.00/sqm.Bedroom Coefficient P 160,000.00 / bedroomToilet /Bath Coefficient P 60,000.00 /T&BGarage Coefficient P 70,000.00 / Garage

What is the estimated value of the subject property which consist of a 3-bedroom, 2 toilet/bath, 30sqm. living/dining area with a garage?

Answer :Regression Constant - P 500,000.00Living – Dining Area P 7,000.00 x 30sqm. - 210,000.00Bedroom P 160,000.00 x 3 - 480,000.00Toilet /Bath P 60,000.00 x 2 - 120,000.00Garage P 70,000.00 x 1 - 70,000.00Value of property - P1,380,000.00

STATISTICS Mean - average Median - center or 2 centers/2 Mode - most number Aggregate - total Range - highest less lowest

DEPRECIATION COMPUTATION See our examples at Book 1

CONSEQUENTIAL DAMAGE IN EXPROPRIATION Value before expropriation or the value decided by court, say, P10,000.00 Less : Value of the unaffected portion of the property

o After expropriation say 6,000.00 Consequential damage per sqm. P 4,000.00

SELLING PRICE / SQM UNDER PD 957 SP/sqm = Unit Cost / Rate of unit cost in relation to SP UNIT Cost = Acquisition Cost/sqm + Dev Cost/sqm

Percentage of Saleable Area

BAND OF INVESTMENT METHODQuestion : What is the indicative interest rate if recapture rate is 4%

The bank is willing to give 70% to the price of land and building The buyer shall put the 30% equity Interest rate the bank asked is 12% The buyer is satisfied with a 10% return on his equity

Answer : Bank 70% x 12% = 8.40% Investor 30% x 10% = 3.00% Overall rate = 11.40%

Interest rate = 11.40% - 4% = 7.40%

CONSUMER PROPERTY INDEX

Formula : Value (Current Year) = CPI (Current Year)Value (Base Year) = CPI (Base Year)

Where : CPI 2010 = 166.10 CPI 2005 = 129.80

Example: New threshold of BIR of real estate prices and residential rentals by those habitually engaged in real estate business as dealers, developers and lessors effective January 1, 2012 per BIR Revenue Regulation 3-2012 – NOT SUBJECT TO VAT

Based on 2010 CPI Year 2005 Jan. 1, 2012

Sale of vacant lot P1,500,000.00 P1,919,500.00 (rounded)Sale of res. Dwelling P2,500,000.00 P3,199,500.00 (rounded)Res. Leases P 10,000.00 P 12,800.00 (rounded)Gross receipts (1yr.) P1,500,000.00 P1,919,500.00

VAT RateUp to January 31, 2006 - 10%February 1, 2006 to present (2012) - 12%

Computation:Value 2012 (??) = 166.10P1,500,000.00 = 129.80

Solution : By Cross Multiplication

Value 2012 = 166.10 x P1,500,000.00 / 129.80 = P1,919,491.52 Value 2012 = 166.10 x P2,500,000.00 / 129.80 = P3,199,152.54 Value 2012 = 166.10 x P 10,000.00 / 129.80 = P12,796.61