I cannot think of a “How to” article. Quickbooks and American Express have ideas on their page. I disagree with both on valuation. for example they say to evaluate a business take gross receipts and multiply by 1.2. Many Real estate agents and business brokers accept this generic valuation. I disagree because suppose you have 1mil in gross receipts and 1.2mil in expenses? That shows me a mismanagement of funds in the business and a company that I sure as heck would not pay 1.2mil for the “Opportuntiy” neither would any bank.
Pat
Assessing value of a Commercial Investment - Posted by Maurice (Ca)
Posted by Maurice (Ca) on June 17, 1999 at 10:57:18:
Hello all:
How do you assess the value of a Commercial property that will include the business & all the equipment? I’m not going to give details because I posted a similar question including the details & didn’t get any response. So generally how would you assess it’s value? I know for SFH you use comparable sales…I’ve heard for multi-unit properties you use Cap rates or something like that.
Please help…if anyone is familar with commercial investing & need me to give more details, I’d be more than happy to.
Maurice,
In the example you would be assessing 2 different assets.
1-Commercial property - Do comps similar to SFR’s, then look at the market rents to figure cash flow.
2- Business - That market us a little different, we evaluate businessess based on profit + Equipment value.
In both areas determine what you want for ROI and IRR before making an offer then structure 2 offers 1 for the bldg and 1 for the business, the reason being is primarly for tax reasons, if structured right you can pick up a great deal of money in the purchase.
Pat
Re: Assessing value of a Commercial Investment - Posted by Maurice (Ca)
Posted by Maurice (Ca) on June 17, 1999 at 11:37:51:
Wow, thanks for the info. Any suggestions on a “how to” article here or any other site or possible book I can pick up on learning more about this. I am in the process on a pretty big deal that if closes, I feel will be very profitable. But I want to move efficiently, yet cautiously to get this deal done right…so again thanks!