Formula, rates and due dates REA

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 interest o 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 tax o 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 sale o Basis is always SELLING PRICE like REGISTRATION FEE at the Reg. of Deeds o

2.

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

NATIONAL TAXATION 

TAX BASE in Sale o 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 plus o P10.00 for every succeeding P5K and fraction thereof OR o 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 Tax o 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 Tax o 3% (fixed) x Actual Business Receipts per month



Value-added Tax o 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



Donor’s Tax o From 0% to 15% x BIR Tax Base ( up to 4th degree of consanguinity)  First P100K donation is exempted to donors tax o o 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 condominium o Selling price is P3,199,200.00 and below is exempted

Beyond 4th degree: Fixed at 30% x BIR Tax Base Son-in-law or daughter-in-law is considered a stranger 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 5M o Net estate of husband and wife 5M o Less: 50% share of the surviving spouse 2.5M o Net estate subject to tax - P2.5M o 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 DATES o 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 or o 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 PAYMENT o Basic BIR tax o 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 paid o Basic Registration Fee  ( Selling Price / 20,000 x 90) + P1,146.00 o 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. 2. 3. 4. 5. 6. 7. 8.

Square and Rectangle = Length x Width Triange = Base x Height (Right Angle) / 2 Trapezoid = The sum of parallel lines x Height / 2 Hypotenuse = Square Root of the sum of : ( BASE 2 + HEIGHT2 ) Floor Area = Length x Width Volume = Length x Width x Height Pace Factor = Number of Steps / Actual Distance Rhombus = Base x Height

9. 10. 11. 12. 13. 14.

1.00 = 100% 0.25 = 0.25 x 100% = 25% ¼ = 0.25 or 25% ½ + ½ = 2/2 or 1.00 ½ x ½ = ¼ 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 feet o 1 meter = 100 centimeters

o o o o 17.

1:200 = 1 cm. in paper is = to 200 cms. in earth surface 1 km. = 1,000 meters 1 ares = 100 square meters 1 centares = 1 square meter

Financing : o Loan Value based on Collateral o Appraised Value x Loan to Value Ratio o

Loan o o o

Value based on Capacity to Pay Monthly Amortization / Mo. Amortization Factor OR Monthly Amortization x PWF Formula for PWF : (S-1/Si )

o o

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

Formula for S : ( 1 + i)

n

Installment Sale 1. 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

Loan Entitlement Based on Monthly Income  For NCR Applicants  Required Mo. Income o Up to P15K per month  P400K loan and below o 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 below o Up to P14K per month  P750K loan and below 

19.

o Not to exceed 35% of Mo. Gross Income For loans over P1,250,000.00 up to P6M o Not to exceed 30% of Mo. Gross Income

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%

Appraisal

Three Approaches to Value 1. 2. 3.

1.

Market Data or Sales Comparison or Comparable Approach Cost Approach Income Approach

Market Data Approach: Price of Comparable Plus or Minus Adjustments due to:  Terms of sale  Time element  Location and physical character xxxxx Value of subject property

2.

-

Pxxxxx

-

Cost Approach

Replacement /Reproduction Cost New

Pxxxxx

-

Pxxxxx Less : Accrued Depreciation Value of improvement Add :

-

xxxxx xxxxxx

Land value ( by market data)

-

xxxxxx Value of land and building

3.

Income Approach

General Formula :

Value

-

=

Pxxxxxx

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 o

(Present Worth Factor Formula)

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- Annuity o Property Residual – Annuity o Leased Fee Estate Value calculation o 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 approach 1. Direct capitalization method 2. 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 Line a. 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 METHOD o Uses the selling price and effective gross income of comparable property o Formula : GIM = SP of comparable / EGI of comparable o 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 property o Formula : GRM = SP of comparable / Gross mo. rent of comparable o Value of Subject Property : = GRM of comparable x Gross mo. rent of subject property

3.

RESIDUAL METHODS – STRAIGHT LINE 3a. Land Residual Method Net Operating Income Less : Income to Building ( OAR x Building Value) Income attributable to the land Divided by : Interest rate Land Value Add: Building Value Land and Building Value 3b. Building Residual Method Net Operating Income Less : Income to Land ( Interest rate x Land value) Income attributable to the bldg. Divided by : Overall rate Building Value

-

- Pxxxxxx xxxxx xxxxxx say 6% xxxxxx xxxxxx - Pxxxxxx

- Pxxxxxx xxxxx -

xxxxxx say 8% xxxxxx

Add: Land Value Land and Building Value

3c.

xxxxxx - Pxxxxxx

Property Residual Method o

4.

-

NOI / OAR

= Value

RESIDUAL METHODS – ANNUITY METHOD

4a.

Land Residual Method

Net Operating Income Less : Income to Building ( Bldg. Value / PWF ) Income attributable to the land Divided by : Interest rate Land Value Add: Building Value Land and Building Value 

4b.

-

- Pxxxxxx xxxxx xxxxxx say 6% xxxxxx xxxxxx - Pxxxxxx

USE PWF TO BUILDING VALUE COMPUTATION ONLY

Building Residual Method Net Operating Income Less : Income to Land ( Interest rate x Land value) Income attributable to the bldg. Multiply by: PWF Building Value Add: Land Value Land and Building Value 

4c.

-

- Pxxxxxx xxxxx

-

xxxxxx - xxxxxx xxxxxx xxxxxx - Pxxxxxx

USE PWF TO BUILDING VALUE COMPUTATION ONLY

Property Residual Method

NOI 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 - P24,000,000.00 Less : Allowance for vacancy and bad debts, say 10% 2,400,000.00 Effective Gross Income (EGI) 21,600,000.00 Less: Operating Expenses, say 6,480,000.00 NET 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% How   

or P151,200,000.00

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% = P151,200,000.00 ACTUAL COST = = P153,200,000.00 DIFFERENCE (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 Rate o Case 1 o Brand new building, estimated useful life 50 years, straight line method o Recapture rate = 100% / 50 years = 2% o

Case 2 o Old building, estimated remaining life 25 years, straight line method o Recapture rate = 100% / 25 years = 4%

Accrued Depreciation Rate o Effective Age / Useful Life OR o Effective Age / Effective Age + Remaining Useful Life o In appraisal, Effective Age is used instead of Chronological Age or Actual Age Curable and Incurable Depreciation o 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) Functional obsolescence o can be curable or incurable (within the property) Economic obsolescence o is always incurable depreciation (outside the property)

o o

Leasehold o o

Leasehold is positive if Market Rent is higher than Contract Rent Leasehold is negative if Market Rent is lower than Contract Rent. The excess is called excess rent or overage rent

Amortization Factor o o

= S i / S -1

Loan Value x Amortization Factor = Periodic Amortization 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 pay o 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 S o 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 xxxxx Plus : Reversion Value of Subject Property (use 1 /S) xxxxx Equals : Property Value - P xxxxxx LEASEHOLD FORMULA Market Rent - Contract Rent Multiply by: PWF Present Value of Leasehold

-

P xxxxx xxxxx 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 life o 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 o From o

market comparable NOI of comparable / Selling Price of comparable Band of Investment Method See our example at Book 1

DIFFERENT METHODS IN SITE VALUATION : 1. MARKET DATA OR SALES COMPARISON APPROACH   

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

P xxxxx xxxxx 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 - P5,000,000.00 Less : Allowance for discount ( say 10%) 500,000.00 Estimated cash value of house and lot 4,500,000.00 Less : Estimated depreciated value of house ( by cost approach) ( FA200 x RCN of P15K/sqm x say at 70%) 2,100,000.00 Estimated 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) - P1,000,000.00 2. 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 computed separately 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 P3,600,000.00 Less: Operating expenses of say, 20% 720,000.00 Net operating income 2,880,000.00 Divided by:

Capitalization rate (interest rate)

-

8%____ Indicative land value Land value per sqm. ( P36M / 2,000sqm.)

- P36,000,000.00 - 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% ) 2,000,000.00 Residual income for the land 600,000.00 Divided by : Interest rate 6%___ Estimated land value P10,000,000.00 Estimated 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 highway o 2nd strip (back of 1st strip o 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 = P1,600.00

or P1,600.00 x 4/4



or P1,600.00 x

   

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

1,200.00 800.00

4th strip : P100M x 10% / 25,000sqm = 400.00 = 400.00 TOTAL = P 4,000.00 AVERAGE PRICE/SQM. o P4,000.00 / 4 strips = P1,000.00

NOTE o o o

or P1,600.00 x 2/4 or P1,600.00 x

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

GOODWILL COMPUTATION

¾

¼

   

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 REGRESSION Applying 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 Living Area Coefficient Dining Area Coefficient Bedroom Coefficient Toilet /Bath Coefficient Garage Coefficient

P500,000.00 P 7,000.00/sqm. P 7,000.00/sqm. P 160,000.00 / bedroom P 60,000.00 /T&B P 70,000.00 / Garage

What is the estimated value of the subject property which consist of a 3bedroom, 2 toilet/bath, 30sqm. living/dining area with a garage? Answer : Regression Constant 500,000.00 Living – Dining Area 210,000.00 Bedroom Toilet /Bath Garage Value of property STATISTICS  Mean  Median  Mode  Aggregate  Range

P

7,000.00

x 30sqm.

P 160,000.00 x 3 P 60,000.00 x 2 P 70,000.00 x 1 -

- average - center or 2 centers/2 - most number - total - highest less lowest

DEPRECIATION COMPUTATION  See our examples at Book 1 CONSEQUENTIAL DAMAGE IN EXPROPRIATION

P -

480,000.00 120,000.00 70,000.00 P1,380,000.00

  

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 METHOD Question : 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 Investor Overall rate

70% 30%

x

x

12% 10% = 11.40%

= 8.40% = 3.00%

Interest rate = 11.40% - 4% = 7.40%

CONSUMER PROPERTY INDEX Formula : Where :

Value (Current Year) Value (Base Year) = CPI 2010 CPI 2005

= =

= CPI (Current Year) CPI (Base Year)

166.10 129.80

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 Rate Up to January 31, 2006 February 1, 2006 to present (2012)

-

10% 12%

Computation: Value 2012 (??) P1,500,000.00

= =

166.10 129.80

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