Ross Heidecke Method
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ScribdTranslations5 DEPRECIATION METHOD
Ross - Heidecke Method
The Ross Heidecke method has been designed exclusively to calculate depreciation in
the valuation of constructions, having as an advantage over other methods, the consideration
of their conservation status; allowing for a more accurate depreciation calculation.
with reality.
The method is exclusive for the valuation of constructions and includes two aspects.
fundamentals that are:
vthe depreciation by age that is calculated with the following formula:
Where:
x = age of construction
n = probable useful life of the construction
vand the state, which is established through the observation and study of the property and
with the help of table number N° 4 (below), depreciation can be expressed
with the following equality.
D (state) = depreciation coefficient
This method considers the following basic principles:
Depreciation is a loss of value that cannot be recovered with expenses.
maintenance.
Repairs can increase the durability of the asset.
A well-maintained asset depreciates regularly, whereas an asset
Poorly maintained depreciates more quickly.
To directly determine the current depreciated value of a building, we must
apply the following formula:
Where
present value
Vn = new value for the building
x = current age
n = probable useful life
E = good factor by state
For the application of this method, ROSS HEIDECKE defines 9 categories of states.
conservation as shown in table number 4.
TABLE No. 4 DEPRECIATION BY STATE
DEPRECIATION TABLE BY STATE
STATE PHYSICAL CONDITIONS CLASSIFICATION COEFIC.
DEPREC.
New buildings without damage in
finishes or structure. 0.0
1 Optimal-O
It presents maintenance work to 0.032
2 level of finishes such as plastering and Very good-MB
painting.
Some finishes have been replaced
partially or totally: side dishes, 2.52
window frames y doors
3 Good B
baseboards, doors, windows, faucets and
others.
Ha received repairs and 8.09
total substitutions at the level of
4 finishes such as plastering and ceilings, part Intermediate-I
pipes, canoes, downspouts, ceramics
sanitary.
Requires repairs a level
structural and finishing in shape October 18
5 partial: subfloor, floors, walls Regular-R
secondary, heavens.
Requires total substitutions at the level 32.20
structural in one or more elements
6 Deficient-D
such as: secondary walls, cover, and
others.
A structural level requires
substitutions totals 52.60
7 Malo-M
in trusses, underfloor and some
primary walls.
Requires structural substitutions in 72.20
8
foundations, columns, load-bearing walls, Very Bad-MM
beams in a partial and immediate form.
Buildings without value for being
9
necessary its demolition. Demolition-DM 100
5.1 Definitions of the states
The following details each of the conservation status:
Optimal: A building in optimal condition is one that, due to its age, has not required
repairs of any kind.
Very Good: These are those that have had normal maintenance tasks, among them is
citing as an example: repairs of cracks in plaster and paint.
Well: They are those that have had normal maintenance work in greater quantity,
are cited as an example: changes in undamaged finishes such as trim, frames of
windows and doors, baseboards, doors, windows, faucets and others.
Intermediate: A building in an intermediate state requires or has received repairs and
substitutions at the finish level and low cost such as plaster and ceilings, part of pipes,
pipes, downspouts, sanitary ware.
Regular: A building in regular condition is one that requires repairs at the level of
structural and finishing partially: subfloor, floors, secondary walls, ceilings.
Defective: They are constructions that require total replacements at the structural level in one or
more elements such as: secondary walls, roof, and others.
Bad: A building in bad condition is one that requires total replacements at the level
structural in trusses, subfloor and some primary walls.
Very bad: A building in very poor condition is one that requires replacements.
important structural elements in foundations, columns, load-bearing walls, beams in partial form and
immediate.
Demolition: These are buildings in a total state of disrepair, so they must be
to demolish oneself.
5.2 State factor
For the purposes of applying the Ross-Heidecke Method in the valuation model
constructions, only the states previously mentioned have been considered, with the
purpose of simplifying the procedure.
To obtain the good factor (E), according to the depreciation coefficient from the table
previously, the corresponding coefficient should be subtracted from 100 and then divided by 100
result.
Example
Determine the current value of a 15-year-old building, whose state of preservation
it is GOOD, which has been determined to have a probable life of 60 years and a replacement value
new at ¢140,000 per square meter.
Applying the previous formula, we have
From the above
¢ 140,000 /m²
x = 15 years
n = 60 years
E = good factor
According to the previous table, the depreciation coefficient by state is 2.52.
Therefore,
VA = ¢115,148.25 / m²
Therefore, the current rounded depreciated value per square meter for the building is
¢115 150 per square meter, according to the applied depreciation formula.