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?

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Der Beitrag Commercial audit: rental agreements, operating costs, maintenance – Valuing a house & apartment erschien zuerst auf ℄ Real Estates.

Definition: What is a ground lease?

You have found a house or an apartment building you are interested in, but it is located on a leasehold land? Or you have found a suitable property and it is subject to a ground lease? What does this mean? Simply explained, hereditary building rights mean that the right of ownership and the right of use are permanently separated. A distinction is made here between two parties: The ground lease provider and the ground lease taker. The ground lease holder leases the land and is then allowed to use the land in return for an annual ground rent.

Here is a summary of the ground lease:

• Ownership and usage rights permanently separated
• 2 parties: ground lease grantor and ground lease taker
• Leasehold in return for building rights

Advantage of a ground lease: Favorable purchase price

Of course, a ground lease has both advantages and disadvantages. Probably the biggest advantage is that the purchase price here is significantly lower than usual, since the purchase price for the land itself is omitted. Leaseholders also benefit from reduced ancillary purchase costs.

The purchase price of a property on leasehold land is significantly lower

Disadvantage: Monthly ground rent

In return for being allowed to use the land, you have to pay a monthly or annual ground rent to the owner of the land. In addition, the mortgage lending value of your property decreases significantly because the value of the land is constantly decreasing while the ground rent incurs costs.

The two disadvantages of a ground lease at a glance:

• Payment of the ground rent causes costs
• Collateral value of the property decreases

Conclusion: Is a ground lease worth it?

Buying or building a property on leasehold land therefore brings different advantages and disadvantages. While you can enjoy a low purchase price, a regular ground rent is incurred at the same time. And the mortgage lending value of the property also decreases.

You can now find even more facts and tips about ground leases on my new project for real estate buyers (Immobilien-Erfahrung.de):

• Ground lease (external)

If you want to learn even more on the subject of buying a property, whether owner-occupied or capital investment, numerous articles, guides on the subject of rented vs unrented, as well as checklists, all free and 24 hours online available, with us!

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Der Beitrag Leasehold and ground rent: definition, advantages and disadvantages for owner-occupiers & capital investors explained erschien zuerst auf ℄ Real Estates.

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

Der Beitrag Income approach: Apartment, house & apartment building – Real estate valuation erschien zuerst auf ℄ Real Estates.