Valuation Methodology

Applied to all methods

Shared conventions

These inputs and conventions apply across every valuation method.

Symbol	Name	Notes
ERV	Estimated Rental Value (pa)	Open market rent at valuation date. Entered as £/sq ft × floor area.
PR	Passing Rent (pa)	Contractual rent currently being paid by the tenant.
n	Unexpired term (years)	Calculated from valuation date to lease expiry or break date, whichever is earlier.
PC	Purchaser's costs (%)	SDLT/LTT/LBTT (banded), plus agent's and legal fees. User-configurable; default 6.8%.

Purchaser's costs — RICS convention

Net value = Gross value ÷ (1 + PC/100)

The RICS convention deducts costs as a proportion of the net price (i.e. what the purchaser effectively pays for the investment). This differs from the simple multiplicative form (Gross × (1 − PC%)) and gives a marginally higher deduction at equivalent percentages. Quick Val uses the RICS convention throughout.

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Vacant Possession (VP)

Capitalises the ERV in perpetuity at the All Risks Yield. Used for vacant, owner-occupied, or short-lease properties where the interest is best reflected by the open market rental value rather than any passing rent.

Year's Purchase in perpetuity (YP perp)

YP perp = 1 / (ARY / 100)

Inside 1954 Act (renewal assumed)

Immediate capitalisation

VP Gross = ERV × YP perp

The tenancy is inside the Landlord and Tenant Act 1954. Renewal is the default assumption — no void or rent-free deduction is applied.

Contracted out of 1954 Act

Deferred by void + rent-free

VP Gross = (ERV × YP perp) × PV(void + rf, ARY)

The tenancy is outside the Act. Income is deferred by the combined void and rent-free period. The perpetuity is capitalised first, then multiplied by the PV factor.

PV factor (present value of £1 deferred)

PV(t, r) = 1 / (1 + r/100)^t

t = deferral in years (void months ÷ 12 + rent-free months ÷ 12). r = ARY.

Net Vacant Possession

VP Net = (VP Gross − Capital costs) ÷ (1 + PC/100)

Capital costs are optional works or refurbishment costs entered by the user and deducted before the purchaser's costs adjustment.

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Term & Reversion (T&R)

Values a let investment in two slices: the passing rent secured during the unexpired term, and the ERV receivable in perpetuity from the reversion date. Appropriate for all let properties with an identifiable lease expiry.

1
Term value — capitalise the passing rent for the unexpired lease term at the Term Yield.
YP(n, TY) = (1 − (1 + TY/100)^−n) / (TY/100)

Term value = PR × YP(n, TY)
2
Reversion value — capitalise the ERV in perpetuity at the Reversion Yield, then defer back to today.
YP perp = 1 / (RY/100)

Reversion value = ERV × YP perp × PV(deferral, RY)
3
Deferral period and void treatment — depends on the 1954 Act status of the lease.

Inside 1954 Act

Defer to lease expiry only

Deferral = n years

Renewal is assumed. No void period — the new lease is expected to follow immediately. No rent-free deduction.

Contracted out of 1954 Act

Defer to expiry + void

Deferral = n + (void months ÷ 12)

Void is absorbed into the PV deferral — not deducted separately — to avoid double-counting. A separate rent-free deduction is applied after reversion using the same deferred PV factor.

Rent-free deduction (contracted-out only)

RF cost = ERV × (rf months ÷ 12) × PV(deferral, RY)

This deducts the rental income foregone during the rent-free incentive at the reversion date, discounted back to today at the Reversion Yield. Void is already in the deferral period and must not be deducted again here.

Net Term & Reversion

T&R Gross = Term value + Reversion value − RF cost T&R Net = (T&R Gross − Capital costs) ÷ (1 + PC/100)

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All Risks Yield (ARY)

A single-rate capitalisation that reflects all risks and benefits of the investment in one yield. Applied to the passing rent for rack-rented property; uses the hardcore/layer method for over-rented property where passing rent exceeds ERV.

Rack-rented (PR ≤ ERV)

Single-rate capitalisation

ARY Gross = PR / (ARY / 100)

Passing rent capitalised in perpetuity. Suitable for fully-let investments where rent is at or below market.

Over-rented (PR > ERV)

Hardcore / layer method

Core = ERV / (ARY / 100) Froth = (PR − ERV) × YP(n, ARY + 2%)

The sustainable income (ERV) is capitalised in perpetuity. The overage above ERV is treated as a short-term froth, valued for the unexpired term only at a higher yield reflecting the additional risk.

Froth yield (over-rented)

Froth yield = ARY + 2%

The 2% uplift over ARY reflects the additional risk that the over-rented income may not be renewed at the same level. This increment follows common market convention and RICS guidance on hardcore/layer analysis. Quick Val applies it as a fixed uplift; a configurable froth yield is on the roadmap.

Net All Risks Yield

ARY Gross = Core + Froth (or PR / ARY for rack-rented) ARY Net = (ARY Gross − Capital costs) ÷ (1 + PC/100)

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Comparative (£/sq ft)

Derives a capital value directly from comparable sales evidence expressed as a price per square foot. Applied at property level across all units.

Comparative value

Comparative value = Total floor area (sq ft) × Comparable £/sq ft

Floor area is the sum of all commercial and residential units. No purchaser's costs deduction is applied to the comparative — the comparable price per sq ft is assumed to already reflect acquisition costs in the comparable transactions.

Yield calculator

A standalone tool for quickly calculating gross and net investment yields from a purchase price and passing rent. Purchaser's costs are applied progressively by SDLT/LTT/LBTT band.

Gross yield

Gross yield = (Annual rent / Purchase price) × 100

Net yield

Total outlay = Purchase price + SDLT/LTT/LBTT + other costs Net yield = (Annual rent / Total outlay) × 100

SDLT (England/NI), LTT (Wales), and LBTT (Scotland) are applied progressively using the current non-residential banded rates. Other costs include agent's and legal fees entered by the user.

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Primary references: RICS Valuation — Global Standards (Red Book, 2022); RICS Valuation of Commercial Property (guidance note); RICS Valuation of Investment Property (guidance note); Shapiro, Mackmin & Sams, Modern Methods of Valuation (11th ed.). Where the app makes a specific convention choice (e.g. purchaser's costs formula, froth yield increment) it is documented above.