ABSTRACT
Where a property is let below the full rental value and there is a prospect within the foreseeable future of a reversion to the full rental value, then this type of investment is termed reversionary. There are two main approaches to the valuation of reversionary investments. The first of these is the term and reversion method sometimes known as the block income approach. This method involves capitalising the whole of the income in each tranche. Various methods have been proposed to overcome the problem of determining the relevant capitalisation rates in the use of the hardcore method. One of these is that a preliminary calculation should be carried out to determine the yield on the marginal income. A net-of-tax valuation succeeds in offsetting the advantage to a high rate taxpayer of a reversionary investment. Reversionary investments increase in value up to the date of the reversion regardless of any growth in rents or inflation in the economy.
