Recommendations for resources: Real Estate valuation
July 06, 2021
by a searcher from Babson College - F.W. Olin Graduate School in Boston, MA, USA
I am currently in talks with a Seller about his business but his net worth is mostly tied to the real estate. He would like to work for a couple more years, before he retires. The Seller has proposed a seller financed transaction with a 20% downpayment. If I buy both the business and real estate, the real estate will be 80% of the proposed transaction. Admittedly, I know very little about real estate transactions, what resources would you recommend? I would like to educate myself about real estate valuations, seller financing and process.
Please note that this transaction is in the U.S.
from Boise State University in 800 W Main St, Boise, ID 83702, USA
Also, as advised by #Rich Jordan above, you'll want to determine the market value/possible purchase price of the real estate using the Net Operating Income applied to a cap rate. The real estate cap rate will likely range from 5% to 10% but it depends upon the building type and the local area. You might talk to a local commercial real estate broker to get a "broker's opinion" or real estate value. Generally, this isn't very expensive and can provide you a lot of benefit. Make sure you make it clear that YOU are the client and not the seller. Find a commercial real estate broker that has the designation of CCIM (indicates a higher level of knowledge and professionalism). The real estate broker will generally do the Income Approach (as indicated by our discussion about cap rate) and a Market Approach using previously sold/similar property types.
from University of Kentucky in Dallas, TX, USA
One idea to consider if he wants to stay on for a couple more years, is put something called rev protection on the disability plan, so if something happens to him and he cannot work, the provision pays a matching benefit back to the company that equals his disability payment. Since it is taxable income to the company, that part of the premium is tax deductible as a business expense, and protects you in case the owner goes out on disability.....which happens...
This is not buy/sell it's a different concept and is guaranteed issue on the group LTD plan....
This and other ideas exist ....just dm me for the path...