Valuation Matters: Appraisers Apply Four Tests to Determine Highest and Best Use
Kadir P. Sunardio
An important factor for an appraiser to consider when valuing real property is its “highest and best use.” This article reviews the four tests appraisers typically apply to determine that use.
Eminent Domain and the “Project Influence” Rule in Property Valuation
Eminent domain refers to the power of the government to take private property for public use. Under the Fifth Amendment, the government exercising this power must provide the property owner “just compensation,” which is generally the property’s fair market value (FMV). However, the valuation of the property may be influenced by the government’s plans for the acquisition, which can increase or decrease the FMV of the property. This is where the project influence rule comes into play.
Five Immediate Factors to Consider Before Buying That Real Estate “Bargain”
Sarah M. Zambrano
With the real estate industry’s steady growth over the past several years and property values holding reasonably constant, investors are eager to jump on a perceived bargain. While securing the lowest price is not a bad idea, investors need to be careful about doing their research before closing on an apparent deal. That so-called “bargain” can quickly turn into a problem if you fail to consider more than just the purchase price. Before taking the plunge and buying a seemingly good parcel, here are five other factors to consider.
Using Cost Segregation Studies for Like-Kind Exchanges
Cost segregation studies have been utilized by many property owners to take advantage of accelerated depreciation methods, including bonus depreciation and Internal Revenue Code Section 179 expense deductions. Accelerated first-year deductions do not change the total amount of deductions over an asset’s useful life, but they do change the timing of deductions. This lowers taxes and generates extra cash flow in the year an asset is placed in service.
Captive Insurance Strategies Can Pay Off for Real Estate Operators
Federal tax law has permitted U.S. businesses to form so-called “captive” insurance companies for many years, and numerous large companies have done so. It is only relatively recently that the arrangement has gained traction with smaller public and privately owned companies. Could your real estate business benefit from pursuing captive insurance strategies? To find the […]
Crowdfunding Comes to Commercial Real Estate
Kadir P. Sunardio
You have probably heard of Kickstarter and other popular crowdfunding platforms that are used to obtain funding from individual investors for everything from independent movies and music to health care and legal expenses. In the past few years, crowdfunding platforms have also popped up to offer individuals a way to invest in commercial real estate […]
Can Nonrecourse Loans Still Create Personal Liability?
With the many types of loans available to borrowers, nonrecourse loans remain popular with borrowers because they can shield them from personal liability. Even if you own your business through a limited liability company, banks may not be willing to lend funds without recourse. Lenders will try to add “carve outs” to minimize that protection. […]
Three Landlord-Friendly Fixes to Lease Accounting Rules
The new rules on accounting for leases have already taken effect for public companies and will apply to all other entities in 2020. While most of the rule changes apply to tenants, some of the provisions mark a departure for landlords — and many parties raised concerns about the rules’ cost and complexity soon after […]
Don’t Wait to Purchase Business Interruption Insurance
Kathy Z. Jeziorski
It is important for real estate businesses to have adequate insurance coverage, and you cannot just cover the property itself. Natural disasters, as well as utility failures, may render properties temporarily or permanently unusable. Business interruption insurance can help when you are unable to generate your usual income.
Consider a Community Bank for Your Next Loan
Have you ever borrowed funds from a community bank? Real estate developers and owners often overlook this source of financing, but these lenders offer some distinct advantages for borrowers.