Theory

The Time-Varying Membership includes the useful Land Valuation System

An email will be sent to your e-mail address after you buy, 
with the program file attached.

Value is defined as the sum total of all the future benefits and losses to an individual or an entity for which the value is determined. The infinite spreadsheet establishes a deterministic relationship described by an equal number of equations and unknowns between the price and all the factors affecting the price in an expected time space extending from now to the infinite future. The infinite spreadsheet expands the current finite spreadsheet to infinity. It does not assume a resale price in the determination of the price.

The current finite spreadsheet for planning and decision making should not be allowed because it hides material information, namely, the future beyond the finite time. The infinite spreadsheet captures the infinite reality in its entirety. In practice, it allows full disclosure of all the future investment expectations. The full disclosure now will allow the full accountability of the predictions in the future. The infinite spreadsheet expresses the price in terms of all the factors affecting the price; it interprets quantitatively the price based on all the inputs used to calculate the price, extending to infinity in time. Most importantly, with known market prices, the price interpretations can be used to expose any irrational investment expectation. For the real estate market, the prediction of under-valuation and over-valuation has been shown to be nearly infallible.

In practical applications, being a mathematically rigorous yardstick for measuring investments, the infinite spreadsheet relieves agents from all responsibilities, when all the inputs are given or agreed upon by their clients. The scientific method based on empirical verification is not always applicable in social science.

In particular, the solution to price cannot be empirically verified because deterministic sets of data can never be collected when the infinite future, which will never arrive, is involved. In order to carry the calculation to infinity, the inputs are expressed as approximate time-invariant variables. Since the present price depends on the future price, the calculation is done in a time-reversed fashion. The law of supply and demand, or the general economic equilibrium analysis, emphasizes the spatial dependence of the price and has neglected the importance of the temporal consideration, which is investigated in detail in the infinite spreadsheet.

A quantitative supply and demand model for multiple commodities with similar functionality and with a uniform price can be constructed by summing over the quantities whose various prices are determined individually by the infinite spreadsheet. In turn, the quantitative model can be used to obtain the inputs for the infinite spreadsheet, with which it forms a new quantitative foundation for economics and ushers in a new age of social science.

REAL ESTATE VALUATION: Traditional method of investment real estate valuation involves making a large number of input assumptions and using those assumptions to crunch out a return on investment after taxes. Price (or value) is a required input as well as future sales price, called reversion. The investment worthiness of an investment project is heavily dependent upon the future sales price of the real estate investment, as a matter of fact, the results are highly sensitive to what assumptions are made for the future sales price. An analyst of investment real estate can make any project look good or bad, at his own discretion, in accordance with his assumptions for the most important income variables.

The deterministic Infinite Spreadsheet Real Estate Valuation System deviates from the traditional approach to real estate investment analysis by

1. Calculating value as an output instead of requiring it for an input, and
2. Not requiring the user to assume future sales price as an input.

The program is actually an investment real estate appraisal program. The usual inputs of income, expenses, financing information, investment period, after tax internal rate of return, etc. are of course required. What makes this program outstanding is that it uses a semi-infinite time series for the life of the real estate to predict value. Rather than asking for future sales price as an input (which is difficult to determine), the program asks for the user’s expectation of certain events in the future such as his expectation of future financing availability, future interest rates, and a subsequent buyers expected rate of return. The reversion for the current buyer is a function of the price the next buyer is willing to pay, which is a function of his expected rate of return, which is a function of his eventual sales price, and so on, and so on, and so on. 

The program is easy to use and is found to be incredibly accurate. The outputs are appraised value, annual cash flow before and after taxes, amount of tax shelter, loan payments, and the traditional rule-of-thumb indicators, gross multiplier and capitalization rate. Rather than large lengthy reports, the inputs and the outputs may be printed on a single page. 

It is an excellent tool to give a rigorous interpretation of the price in terms of all the factors affecting the price and to use as a negotiating tool for either the purchase or the sale of investment real estate. General Explanation of the Unified Method of Real Estate Appraisal: The deterministic solution to real estate appraisal based on the infinite spreadsheet has combined the three traditional approaches of real estate appraisal into one unified method of appraisal. 

The traditional market comparison approach compares only the price, but the deterministic method has been designed to compare, in addition to the price, all the economic factors affecting the price. The results of the comparisons can then be used as inputs in the income approach, which corresponds to the infinite spreadsheet calculation for the monetary return, to determine the price or any other economic variables when the price is known from sales data. The cost approach is used in the determination of the price of land, corresponding to the residue value, which can be determined when the expected sales price of the developed property has been determined by the infinite spreadsheet. The unified method is represented jointly by the income approach, the market comparison approach, and the cost approach. Instead of appraising three different prices individually using the three traditional approaches, the unified method has managed to put each approach in its proper place within a single method and has, finally, reconciled, in a natural way, the three generally different prices for the same property into one single price. Thus, no longer will there be the need for the appraiser to face the embarrassing situation of having to choose one out of the three, often conflicting, prices, whose determination could be required by traditional appraisal standards.