Partial Interest Appraisal

[Howard Klahr]

That would be leaving the best part of the fee on the table. It is well worth gaining experience in this area

 

[DanBuck]

minority interest

Well in my place we first appraise the building as a whole. And then, assuming property is valued at $1,000,000 and gifting will be 30% which=$300,000. At this point you can apply a minority discount rate of %30-%40(depending on your source for the proper rate) which would leave the total value at $210,000 for transferring a non-controlling interest of 30% of such a property...

 

[George Hatch]

The math is the easy part. It's supporting the discount rate that's harder to do.

 

[David Mescon]

That would be leaving the best part of the fee on the table. It is well worth gaining experience in this area

Couldn't have said it better.

Minority interests typically see discounts of anywhere from around twenty to eighty percent depending upon a whole lot of variables. I'm pretty sure you won't find the right number on "the list" either. Well, in light of some of the off the wall minority interest appraisals I've seen, maybe you will.

 

[Michigan CG]

There is no way I am doing a partial interest appraisal. They can't afford the fee for me to do the research and I don't want to do it. I give them my opinion of the value of the whole property and let someone else decide the discount.

 

[Howard Klahr]

Well in my place we first appraise the building as a whole. And then, assuming property is valued at $1,000,000 and gifting will be 30% which=$300,000. At this point you can apply a minority discount rate of %30-%40(depending on your source for the proper rate) which would leave the total value at $210,000 for transferring a non-controlling interest of 30% of such a property...

The math is the easy part. It's supporting the discount rate that's harder to do.

George's point is more appropriate than you may know. 30%-40% discount is thrown around quite frequently. When evaluating partial interests there are actually two discounts that are applicable 1) for lack of control 2) for lack of liquidity. The most interesting is when the value of the minority interest is discounted for lack of control in that depending on how the interest is established and operated, the minority interest can in fact have more control and influence than the majority owner.

One must avoid using generalizations in an area requiring specialized knowledge.

 

[David Mescon]

When evaluating partial interests there are actually two discounts that are applicable 1) for lack of control 2) for lack of liquidity.

And, let us not forget the extreme difficulty in borrowing against such properties - even for a majority owner.

 

[J Grant]

Two twenty unit apt buildings sounds like a good monthly cash flow of income...I wish someone would gift me a third of that!

 

[Stone]

George's point is more appropriate than you may know. 30%-40% discount is thrown around quite frequently. When evaluating partial interests there are actually two discounts that are applicable 1) for lack of control 2) for lack of liquidity. The most interesting is when the value of the minority interest is discounted for lack of control in that depending on how the interest is established and operated, the minority interest can in fact have more control and influence than the majority owner.

One must avoid using generalizations in an area requiring specialized knowledge.

Pfffftttttt......each discount is 15-20%. Easy.

 

[Mr Rex]

You just have to pay a little extra for the cap rate book to include the addenda with the partial interest discounts. Available at the same store as all of the adjustment books.