Commercial test: Calculate purchase price

So, if you have found a property that you like, you should check it in advance. For this, you proceed in two steps:

1. Commercial examination
2. Technical test

To calculate the purchase price, you should write down all negative points in advance. You will need these not only for the purchase price calculation, but also for the later purchase price negotiations with the seller. These are the important, general points that come up in every commercial examination of a property.

Rental agreement, rent arrears and reduction

If you are purchasing an unrented property for your own use, these points are less important to you. However, if your property is still rented or if you want to purchase it as an investment, you should make a note not only of the deposit, but also of any special features and individual agreements in the rental contracts.

• Can all ongoing operating costs be apportioned to the tenants?
• Is there a deposit that has been agreed upon?
• What special features were agreed in the lease agreements?

Rent reductions and increases are also important for the commercial audit and should be noted for this purpose.

Non-apportionable operating costs: checklist

Some operating costs can be passed on to your tenants, but some cannot. In particular, costs for property management and maintenance, as well as depreciation, must always be borne by the landlord.

Are there any non-apportionable costs?

Here are a few examples:

• Costs for property management
• Maintenance costs
• Costs for repair
• Depreciation
• Reserves

In particular, renovation and refurbishment measures that serve to maintain the property cannot be passed on to the tenant.

Maintenance: Housing arrears & upcoming refurbishments

Maintenance is also an important criterion in the commercial audit. For this purpose, we recommend that you check the maintenance reserve on the basis of the last utility bill by asking for the last utility bill. Calculate a typical average of 1 euro +/- 20 cents per square meter. You will find upcoming renovation and modernization measures in the collection of resolutions.

So this is something you should definitely pay attention to:

• Amount of the maintenance reserve
• Amount of existing house money arrears
• Examination of the collection of resolutions

Checklist: Commercial audit

Here, once again summarized, the – typical – 11 test points in short form:

1. Can you pass on all current operating costs to your tenant(s)?
2. Has a deposit been agreed?
3. Are there any special features in the lease agreements?
4. Are there currently any outstanding rent arrears?
5. Are there any active rent abatements?
6. When were the last rent increases implemented?
7. How much rent could be achieved on new leases?
8. Do you expect to incur non-apportionable costs?
9. How much is the maintenance reserve of the WEG?
10. Are there any house money arrears of the WEG?
11. Have you reviewed the collection of resolutions?

Tip. Buying real estate: Learning from A-Z

Everything from A-Z: owner-occupancy or renting, financing a condominium, apartment search, real estate portals, brokers, valuation, purchase prices, negotiations and taxes. Knowledge and experience from experts, in one guide.

✓ A guidebook
✓ All facts
✓ Insider tips
✓ Purchase checklists

Learn step-by-step the home buying process and lots of insider tips!

• Buy apartment

Selling land: Agricultural land, meadow, acre & Co.

You may have already read our great guide on selling land, or perhaps you have read more specific guides, for example on selling woodland land.

For those who are dealing with the matter of land sale for the first time, the question surely arises:

• How do I sell my agricultural land?
• Which step do I start with?
• Who advises me, prepares expert opinions & Co.

Here are a few pointers for selling farmland, agricultural land and other, more specific land. You can also read more about the process, mistakes and risks, as well as taxes when selling land.

Sell privately or with a professional?

The question is answered relatively quickly. There are various parameters that influence the selling price. These include, for example, the property valuation, as well as a solid and capital-strong buyer network, but also negotiating skills. After all, it is not “only” about a condominium, but about more complex, agricultural usable areas, with all the addition around soil expertise, forecasts and development possibilities.

Minimize effort, maximize profit

Selling agricultural land privately, for example through real estate portals, not the best idea.

1. What do you do with all the requests?
2. What documents, papers and expert opinions do you need?
3. Who sends info and makes phone calls for questions?
4. Who really has the credit rating and willingness to buy?
5. How many surveys do you want / need to do?
6. Who prepares and conducts the negotiations?
7. …

From credit rating (creditworthiness) to viewing appointments and negotiations: Time is money. Therefore, in this country 70% + sell with the help of professionals, such as an estate agent.

Sell privately?! Risk private sale

Time is of the essence. If you are not under pressure to sell, excellent. Then you may be able to make a mistake or two. But who wants to do that? Here is a recent example of a client who wanted to sell his property in Berlin. Private.

Example of agricultural land in the Berlin hinterland

Here is an example of a client who approached us, a typical case. It was an area in the Berlin area that was to be sold. The mistake in brief: private sale without sufficient credit check or financing confirmation from a bank. The result: months of delay and abandonment.

The seller has advertised privately on a known portal. Promptly came many messages, but almost all conversations ran into the void. Weeks passed.

Error: Insufficient creditworthiness and verification

After months, finally found a person who had the will and the credit rating – supposedly. So after the site visit talk about checking the financing, by the buyer’s bank and wait. Again, a few weeks pass.

Then you get after further weeks a feedback from the buyer and/or prospective customer that the financing was rejected with the first bank, therefore now with a second house bank one inquires. You wait.

After another few weeks passed, he still had no confirmation of financing from a bank, no preliminary purchase agreement, and no notary appointment.

Conclusion – pressure and frustration:

Suddenly there is more and more pressure to sell, and at the same time frustration rises.

You wouldn’t believe how many private sellers have this exact story happen to them.

That’s why over 2/3 of the properties are sold with professionals on the side (brokers and the like).

Professional land trading for agricultural land

Preparation is the key so that you do not lose months in the sale of A and B locations, and even years in C locations.

Preparation is the key: even with agricultural land

However, the work starts much earlier, which is another reason why working with a broker is advantageous.

Tip on the broker’s commission! Privately, the law currently provides that 50/50 is shared (buyer, seller). In commercial trade you can also put 100% on the buyer.

So, in principle, in the commercial trade it does not even cost you money. For this you get the network when it comes to a reputable real estate dealer.

• What documents and papers do you need?
• Which groups of buyers are you addressing with this particular property?
• Do you want everyone to know you want to sell your farmland?
• Should everyone know the value (your asset growth)?

Discretion: neighbours, envy and competition

In addition to the time factor (= money), for many sellers of agricultural land is also important that your property is made discreet, anonymous. From competition in the region to family, the neighbors or even receiving large sums of money. There are several reasons why a majority of sellers want to sell anonymously and discreetly.

Personal network: buyers and investors

Professional property trading looks quite different, of course. Here it is not about marketing in real estate portals, personal buyers are adressed, investors, funds but also foreign investors groups.

Investors from abroad: Profitable business

Foreign investors for a farmland? Yes! Many are looking for good returns and capital investment in this country. Due to the attractive returns in this country, but also the good soil quality and water quality (groundwater and water sources) in general, there are also very many investors from near and far abroad looking for land.

The big advantage for you as a seller, here the money sits a little looser than in the country – simply said.

Central for this is of course again a renowned real estate agency.

Exclusive is fast: supply and demand

Another strong advantage for you on the seller side:

Deals are being closed much faster.

Why? The properties are traded exclusively and the offers are made only to individuals. This exclusivity ensures the scarcity of supply and thus increases the demand on the customer side.

Time is money! Especially wealthy customers do not want to waste time

Wasting time, in which, for example, several interested parties are at one property. Business should be done quickly.

Find a real estate agent: Renowned office or from the region?

Therefore, consider working with a regional real estate agent who does what everyone does: Posting your farmland widely on all real estate portals. After that, hundreds of people will write, there will be many conversations, emails, plus phone calls. Very much time passes, few really have the creditworthiness, the will, as described before.

The process of finding a farmland takes months, sometimes even years.

Time is money! Addressing investors

Here is another psychological aspect that gives you advantages in off market trading:

When professional investors or their employees see that properties are listed on real estate portals, the question immediately arises: Why? Why has the property not found a buyer? No one would even continue to deal with this object. After all, there are thousands of advertisements. Who is supposed to see through all of them?

Family offices, real estate funds, etc.

Family offices, real estate funds and others therefore speak directly with renowned real estate offices and have only exclusive properties presented to them. Then everything goes very quickly.

In the off-market area, you will find the big family names, i.e. family offices, real estate funds, other institutions, which are approached individually and specifically, depending on the purchase profile.

This is all called off market trading.

Selling farmland: Procedure, taxes and tips

Would you like to learn more about selling agricultural land? Then take a look at our detailed guide on the subject of selling land. Here we talk about the concrete procedure, in all the individual phases of the sales process. You will learn more about the typical mistakes that are made when selling and of course everything about taxes when selling land.

• Sell land

Agricultural land / field with spring?

Selling a water well – appraisals, brokers, negotiations, process and taxes, there are also many questions when selling a water well. Is now the right time for you to sell? And if so, what is the most effective way to sell? Water is a scarce resource. Even though over 71% of our planet’s surface is water, there are fewer and fewer productive, clean water sources. Low supply, high demand: don’t just think regional buyers, think mutual funds and yes, food companies too. For that, you need a broker with an exclusive network. Whether a sole proprietor or a water cooperative, learn about the matter of selling here.

• Sell field with spring

Income capitalization approach: how does the calculation work?

The capitalised earnings value method determines the capitalised earnings value of the property and is used to value properties that are expected to generate an economic return. The capitalised earnings value is meaningful when yield considerations are at the forefront in the case of rented properties and commercial properties. Capital investors and investors in particular can use the capitalised earnings value to compare alternative forms of investment. In the case of commercially used or rented properties, the determination of the capitalised earnings value is also the basis for the mortgage lending value of the property.

Market value of the land and the building income value

The capitalised earnings value method divides the property into the market value of the land and the building income value. This includes rental income, maintenance costs and costs for managing the land and building. Accordingly, the rental income less the management costs and the land value including its interest are compared.

Calculation example: Income value – simply calculated with Lukinski

For the calculation of the income value of your property, we assume the following information as an example. This information can then be used to calculate the values of the gross annual amount and the annual net income as well as the operating costs.

• Area: 200 square meters
• Price: 7 euros per square meter
• Operating costs: 25 percent
• Property interest rate: 7 percent
• Land value: 100.000 Euro
• Building damage: 3.000 Euro
• Expiry date: 12,50

Calculation of annual gross amount, annual net income and operating costs

• Annual gross profit = 200 sqm * 7 Euro / sqm * 12 months = 16.800 Euro
• Operating costs = 16,800 euros * 25 percent = 4,200 euros
• Annual net income = 16,800 Euro – 4,200 Euro = 12,600 Euro

So after deducting the costs, 12,600 euros are left over from the annual rental income. The following continues to apply:

• Land value interest = 7 percent * 100,000 euros = 7,000 euros
• Preliminary capitalised earnings value = 12,600 Euro – 7,000 Euro = 5,600 Euro

Calculation: Building income value and capitalised earnings value

For the building income value, the provisional income value is multiplied by a multiplier. The multiplier is a key figure calculated from the property interest rate and the remaining useful life. The longer the remaining useful life of the building, the higher the multiplier. To determine the income value, any structural damage is then deducted from the building income value and the market value of the land is added.

• Building income value = 5,600 Euro * 12.50 (multiplier) = 70,000 Euro
• Earned value = 70,000 euros – 3,000 euros + 7,000 euros = 74,000 euros

Let the professionals do the math

Our team of investors will be happy to draw up yield calculations for your desired property. Prospective buyers can be convinced of good returns. Upon request, we will inform you of the data required for the calculation. After receipt of the documents, we take over the determination of the capitalized value and give you a first estimate of the yield.

Valuation for the sale of real estate

All important information about the valuation of real estate sales summarized for you: Valuing a property.

Material value method: Value for the new construction of a property

The calculation first uses the standard land value to determine the market value of the land, then the real value of the building is added.

The real value of the building is calculated on the basis of the building’s production costs less any reductions for age. The real value of the land (market value of the land) and the real value of the building are added together and multiplied by a real value factor.

Value in kind = (100,000 Euro + 150,000 Euro) * 0.5 = 125,000 Euro

The calculation of the asset value factor is based on the building type, the preliminary asset value and the standard land value. The total tangible asset value determined in this way indicates the financial resources that would be required to rebuild the property.

• Real value method

Comparative value method: Comparison of similar properties

The comparative value method compares your property with similar properties. It is used in particular for the sale of owner-occupied apartments and houses. The comparative value can also be determined for undeveloped land.

Price per square metre of the comparable property = 300,000 Euro / 100 sqm = 3,000 Euro per sqm

Purchase price of the property to be valued = 3,000 Euro * 200 sqm = 600,000 Euro

Only properties in similar locations and with a comparable layout are considered in the comparison. The properties included in the valuation should come from the immediate vicinity of the residential property. The comparative value method is considered to be particularly realistic. It is frequently used to determine the value of properties because the locations are relatively comparable from a regional point of view.

• Comparative value procedure

Value appraisal (costs)

Who prepares appraisals for real estate? What does a house appraiser cost? What does an appraiser for old buildings cost? Unless legal regulations require the appointment of an expert, a real estate appraisal will provide you with a realistic valuation of your property in the regional and national market. We provide timely and accurate valuations of land, residential and commercial properties.

However, if the valuation is to be presented in court, for example in the case of a divorce, experts must be consulted for a fee. The residential or rental property is inspected on site. As a rule, both a written and a digital copy of the appraisal are issued.

• Valuation report

Gross rent at a glance: Operating costs abstention for a rent

• All utilities included for a rented property and no other costs are incurred
• Difference between gross warm rent and gross cold rent
• Warm rent includes all operating costs in contrast to cold rent

Back to the wiki: Real Estate

Free evaluation of house and apartment

Learn more about home valuation in your neighborhood and street here:

https://ihrhausverkauf.de/bewertungen/wohnung/

Cold rent at a glance: Rent without ancillary costs

• Rental price without the inclusion of service charges
• In addition to the basic rent, an advance payment for ancillary costs is often required.
• Depending on the consumption, the difference is settled at the end of the year.

Back to the wiki: Real Estate