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The lines ‘… he plays by intuition …he plays by sense of smell …’ are probably an exaggeration when applied to the game of pinball, but they are surely a very important part of most professional men's and women's lives. A teacher should ‘feel’ the difference between a minor ailment and something serious. Similarly, a surveyor or valuer can ‘feel’ or sense the possible decline of a high street before it happens or the improvement of a secondary location. This skill cannot be taught in lectures and by some it cannot be learned by experience, but hopefully for the sake of the future of the profession some or most of us can acquire it to a lesser or greater extent. The gifted ones are the millionaires and I am sure that many of these have never looked inside a set of valuation tables.

A preceding paper by Baum examined the valuation of reversionary freehold interests, distinguishing between conventional and modern approaches. This paper applies the same approach to the valuation of leaseholds, and falls into two parts. Part 1 examines conventional leasehold valuations and the criticisms that may be made, concluding that both dual rate and single rate conventional valuations should be abandoned except in limited circumstances. Part 2 identifies three alternative modern approaches — real value, rational model and DCF — and compares their use in three general variations of leasehold valuation. The results are compared, and recommendations for their use are made. Finally an overview of the application of modern approaches to investment property valuation is presented.