• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

valuing a property rented below market rates

Status
Not open for further replies.

associated

Freshman Member
Joined
May 31, 2008
Professional Status
Certified General Appraiser
State
Connecticut
Please advise the proper way to value an industrial property encumbered by a ten year lease agreement, which is the second option renewal period, that is rented below market rates for federal estate tax purposes.
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
Please advise the proper way to value an industrial property encumbered by a ten year lease agreement, which is the second option renewal period, that is rented below market rates for federal estate tax purposes.
Capitalization?
 

associated

Freshman Member
Joined
May 31, 2008
Professional Status
Certified General Appraiser
State
Connecticut
Since the property is leased (NNN) for a stablized annual rent, should the direct or discount cash flow capitalization method be utilized?
 

associated

Freshman Member
Joined
May 31, 2008
Professional Status
Certified General Appraiser
State
Connecticut
below market rental property

Since the property is leased (NNN) for a stablized annual rent, should the direct or discount cash flow capitalization method be utilized?


Since the property is leased (NNN) for a stablized annual rent, should the direct or discountee cash flow capitalization method be utilized?
progress.gif
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
I'm not an AG but I would think you would use MARKET rents rather than actual rents.
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
I'm not an AG but I would think you would use MARKET rents rather than actual rents.
And why would you want to perhaps cause your client to pay tax on something they won't receive?
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
Who is the client? Is it the owner?

You're probably right since I am a lowly AR.
 

Abester

Senior Member
Joined
Jun 12, 2003
Professional Status
Certified General Appraiser
State
Florida
The owner gets two things:

The cash flow for the remaining lease term plus options since, if it IS below market, the tenant is likley to keep it.

And

The reversion...
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
You have a leasehold value to the lessee since he's getting it below market, over the period of the below market lease. Take the contract rent, since that's what you're contractually tied into, and consider the probable holding period of a commercial property. If the below-market rent expires, then you can equalize out the rent for the remainder of the time frame.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks