Appraisal Articles 2019 Free Appraisal Articles for Appraisers and the Public
Appraisers are often asked this question with regard to the real estate owned by a business or a property owner. Of course, the answer for appraisers to this question is that profitability can have to do with many factors other than the simple difference that a real property move could make. If you make a move and it destroys a critical element of your business, then it wasn’t a successful move.
Owners become compelled to answer the question about the profitability of moving when there is a party or multiple parties beating on their door with eye opening unsolicited offers.
Appraisal can begin offering answers by providing an appraisal report. The first answer to their question “how much is the existing real property worth?” can be answered. If they are being offered 3 million dollars that doesn’t mean that the property is worth that. If could be worth 4 million dollars. Exposing properties to the market generally brings the highest value while private sales can bring below-market results.
Once the value of the existing real estate is answered an owner can move on to answering the second question about substitute properties. If research is completed and similar offerings are 3 million dollars there may be little or no point in considering a move. Rarely will another real property on the market be a perfect match and a good substitute for the one that is owned.
If for example the existing property is as simple as an industrial warehouse there are literally hundreds of differences between one building and another. I’m not going to list them all but things like; gross building area, construction, office / showroom build-out, wall height, land-to-building ratio, mezzanine(s), fenced areas, parking ratio, power, doc(s), mezzanine(s), rail service and highway access are a few of the factors that will differ. Some properties if previously used for a similar purpose, like distribution, storage or manufacturing may be similar enough to be adaptable.
Once you have the value of the existing real property and the value of an available substitute property then you can estimate the true cost of making the move and adapting the new property to your existing use. Yes, there are often problems with making a move, its often slower than anyone would like and at times its painful and it could create losses.
The potential profitability of a move usually provides the motivation for change. If substitute properties that you have found for your existing, appraised, 3-million dollar property are found for around 1 million dollars it’s possible that you could adapt another purchased or leased real property for the one you have, suffer any potential losses caused by the move, and still come away with a large profit.
As I mentioned business owners still have to answer business-related questions about the effects of a change in location. Some businesses can move locations without suffering large negative impacts while others cannot. An industrial warehouse business could possibly move if it’s a similar distance to a major highway while an industrial brewery with a retail outlet may lose its customer base by moving only a mile away from its original location. So the real property gains have to be measured against the long-term change in the businesses potential cash flow.
For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/
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