Chap. I. VALUATION OF PROPERTY.

IO95
part with his proiicrty, the G per cent, rate of the table is generally used, by wliicli the
buyer makes too little interest on tiie )ierisliai)le part of tl e jiropcrty. Few would be in-
clii'ied to invest money in S'jcii property at so low a rate, for a rent which every year, from
wear and tear, becomes less valuable. Individuals imderstanding the subject would
scarcely be found to purchase, unless tl.ey could make at least 8 per cent, for tliis ))art of
the capital. In the cases above mentioned, twenty-five years' purchase, that is, 4 per cent.,
is the usual price at which the ground rent is taken.
Having thus prepared the student, we will present an example of a valuation
conducted
on the i)rinciples named. Tiius, suppose a building and the ground on which it stands to
be together worth 15(3/. per annum, and that its durability is sucii that a purchaser may
count on receiving that rent during a term of fifty years. We will suppose the house to
stand upon a plot of ground
'24
feet in frontage and 60 feet in depth
;
that the size of the
house is 24 feet by 40 feet, and tiiat to build a similar one would cost 1,440/., which, at a
r.ate of 7 per cent, upon the expenditure, would produce a building rent of 100/. I6s. per
annum.
d.
Now the total rent being
The rent arising fiom the building itself
The value of the mere ground must be
-
We therefore here have the imperishable part, viz the ground, of the
value of 49/. 4s. per annum, wiiich, giving the purchaser 4 per cent,
interest for his money, is twenty-five years' purcliase for the fee- simple
by the Fourth Talde, that is
- - - - -
1230
O
An annuity (from the building) of
10.""/.
16s., to continue for fifty years,
is, by the Fourth Table at 5 per cent., worth
18
'256 years' purchase,
that is
-------
.
1840
II
The value of tlie old materials at the end of the term, if taken to be
pulled down and sold for 150/., will be that sum at the end of fifty
years to be received at the present time, discounting at 4 per cent,
from the Second Table -1407
x 150
- - -
= 21 2
s. d.
1.50
100 16
49 4
Total value of the freehold -
- .
309I 2 11
49/. 4s,
In the above valuation the ground estimated by its frontage would be ^V^

'1
= 4I. per
foot, and ground is usually let by the foot when demised for building. In the chief parts o
great cities ground is now usually sold and let at per foot superficial.
The next case of valuation is that of a beneficial lease, in which the rent paid by the
lessee is less than the actual value of tiie premises. The difference between tiiem, there-
fore, is an annuity for the term of the lease, which is so much benefit to the lessee, and is
estimated by the Fourtli Table ; thus

Suppose the actual value of given premises be

- .
. _
100
Ilent reserved by tiie lessor
------
50
Beneficial annuity belonging to the lessee - . - _ -
50
If the term of the lease be twenty one years, such is the length of the annuity, and the
question stands as under
:

An annuity for twenty-one years, discounting at 5 per cent., is by the Fourth Table worth
12'8211 years' purchase, wiiich multiplied by 50/.
=
641/. l.f.
It is to be observed that the annuities must be clear after the deduction of all outgoings
which may be necessary to keep it unencumbered.
Let us take another case.
A man takes a lease of ground at 10/. per annum, and lays out
1 ,000/. on a sixty-one years'
lease, interest being 3 per cent. How much must l.e receive as rent to replace the princi-
pal at the end of the term ?
1000/. at 3 per cent.
=
30/. + 10/. ground rent =40/. improved rent.
1/. per annum for sixty-one years at 3 per cent, will amount to 169/. (See Third Table.)
=51. 9s. = the sum to be laid out yearly.
169
And 30/. -1-5/. 9s. =35/. 9s., or 3*59, is the rate of interest to secure or replace the princi-
pal at the end of the term without consideration of repairs, loss of tenants, insurance, &c.