Definition of "Built-up method"

Jason Millard real estate agent
Jason Millard, Real Estate Agent The Millard Team @ The Boulevard Company

Approach to determining a capitalization rate for use in valuating property so as to arrive at a suitable purchase price. To the risk free interest rate is added a risk premium to cover the greater risk. If the risk free rate is 6% and a risk premium of 35 is necessary to compensate for the properties poor liquidity, the built-up total capitalization rate would be 9%.

 

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