16634 Lecture 6: Dual Rate Applications
Document Summary
This topic will introduce you to the valuation of property using dual rates. The notion that an investor anticipates both a complete recovery of invested capital as well as a return for the use of capital, prevails in the real estate market just as it does in other markets. In real estate investments, capital may be recovered in many ways. Investment capital may be recovered through annual income, or it may be recovered all or in part through the sale of the property at the termination of the investment, or a combination of both. Where it is necessary to use different interest rates for the return on the initial capital outlay and the replacement of the initial capital outlay, a calculation of the pv of per annum factor. / yp, must be obtained which factors in the different interest rates.
