Abstract
The article is devoted to one of the debatable problems of the theory and practice of valuation - the calculating of the profit of an entrepreneur in the cost approach to real estate valuation. Discusses the interpretation of the entrepreneur profit as a fair reward for the investor for the risk of investment in the creation of the property and its relationship with the entrepreneur incentive that is the driving force of the development process. The shortcomings inherent in the cost approach are analyzed: the assumption of the instant creation of land improvements and the impossibility of taking into account the risks of investing in the process of calculating their value. The proposed formula for calculating the profit of the entrepreneur for objects with different levels of risk, amount of funding and construction time, allowing to level these shortcomings.
Highlights
What is an entrepreneurial profit? How to define it? Is it always necessary to take into account?Many practicing appraisers very often ask these and other questions related to the entrepreneurial profit in the cost approach to the valuation of the property
He expects to receive a fair reward - known as an entrepreneurial incentive, which is measured in the market by the entrepreneur profit
Entrepreneurs involved in the creation of new real estate, often called the developer
Summary
What is an entrepreneurial profit? How to define it? Is it always necessary to take into account?. Many practicing appraisers very often ask these and other questions related to the entrepreneurial profit (abbreviated EP) in the cost approach to the valuation of the property. In the cost approach the profit of the entrepreneur we understand as a sum of money added to the costs for forming the value of improvements, which, together with the value of land, forms the value of selling the created real estate object. The appraisers are interested in what to do in the period of a sharp fall in real estate prices: use the cost approach or not; if used, take profit or loss into account? Perhaps these are the most important questions that we will try to answer in this article
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