Real Estate Investor Magazine South Africa April 2015 | Page 48

STRATEGIES

How to Calculate

the Costs
Equity value of a commercial
investment property
BY JONATHAN S SMITH

P

roperty investors need to know what their
equity-investment shall be worth following
their investment.
Investor-purchases in property obtain payment of a
return on their invested equity once the expenses of
the building, the debt repayment due to the financier
and the taxation due to the receiver of revenue have
been paid.
The following diagram depicts this allocation of payments:

OME
INC
S

ROS
G

A tabular allocation of the gross income will resemble the
following:

RECEIVABLE
GROSS INCOME

100%

PAYABLE
OPERATING EXPENDITURE 20%
OPERATING EXPENDITURE
FINANCE COSTS
TAXATION
DISTRIBUTABLE INCOME
46

April 2015 SA Real Estate Investor

FINANCE COSTS

30%

TAXATION

37%

DISTRIBUTABLE INCOME

13%

Ratio analysis of the allocation of gross income.

RESOURCES
A Guide to Commercial Property in South Africa
www.reimag.co.za