Yield Capitalization (Discounting)
"Yield capitalization is a used to convert future benefits to present value, by discounting each future benefit typically a periodic income stream and reversion, into present value by discounting each future benefit at an appropriate yield rate, or by applying an overall rate (extracted using one of the yield methods) that explicitly reflects the investment's income pattern, value change, and yield rate." (from: The Appraisal of Real Estate, 13th ed., Appraisal Institute, Chicago, IL (2008). [emphasis added]
Simply stated, yield capitalization is a technique that converts the future benefits anticipated by a real estate investor into the present value of the real estate.
Course Learning Objectives
- To train real estate professionals who are already familiar with the generally-accepted principles of income property appraising one technique for applying the income approach using a HP-12C financial calculator.
- To practice estimating the present value of a property by discounting its projected cash flow and reversion.
Each student should have their own HP_12C calculator (or equivalent) with them for this course. The first part is a review of how to use a HP 12C financial calculator to make the calculations needed to complete the drill problems and case studies that are part of this course. About one hour is devoted to this review. (It is unlikely that agents/appraisers who are not familiar with the HP12C financial calculator will be able to perform the calculations needed for the drill problems and case studies during this brief drill lesson.)
The course has numerous interactive exercises to complete.