Here in the United States, “fair market value” on any item is determined by what a buyer is willing to pay a seller for the item. Simply put, if I have a stick of gum, and I offer it to you for ten cents, and you want to purchase it for ten cents, then the fair market value of the stick of gum is ten cents.

While real estate also has a fair market value, it is a bit harder to determine because of all the factors which go into the valuation. A property, unlike the simple stick of gum in the above example, has multiple aspects for a seller and buyer to put different valuations on. Introduce a lender into the picture, and then you have a third option on valuation to deal with as well.

Determining commercial property market value is different than determining market value for a residential property. In a residential valuation you can simply look at other recent comparable sales in the area, of similar homes and lot sizes, and determine about what a property is worth at any given time. The issue you will find with commercial property is that they tend to be one-of-a-kind properties, and you may not be able to find many local comparable sales in recent times.

One major difference between residential and commercial properties is their location and their use. If you own a large lot inside of the city limits, with a huge warehouse store built on it, with a 10 year lease to a big box store, then you have a very valuable property. If you have the same lot size, with the same store on it, same lease, but it is located 30 miles from the only local town where most people in the area live, then you have a lesser valued property. Location, also known as market area, is more important in commercial real estate because businesses need to be near to their workers and to their customers as well.

Another consideration when looking at market value of a commercial property is the availability of similar properties on the market. By looking at as many properties as possible, you can start to get an idea of what different properties are selling for in your local area. This gives you some leverage to point out differences and better negotiate the price you are willing to pay. This will also give you some idea of how difficult it will be to find a tenant for your property.

If you are tying to determine the market value of a piece of commercial real estate, one of the factors you should always consider is how well other properties in the area are renting and what they are renting for. You will need the rental income to cover your investment funding as well as your day to day costs of owning the property. If you purchase a property at an agreed upon price, will the rents support the costs? What if your property sits vacant for a month or two? These are things you need to think about prior to purchase.

When trying to determine commercial property market value there are many factors which come into play. The biggest being the market area, local property costs, rental income potential, and the property condition itself. By determining what you are willing to pay for a property, and having a professional commercial real estate market analysis completed for you, you can avoid many of the mistakes new commercial property investors make.

By: Andrew Stratton

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Due to the present recession more and more people are diverting their funds from the stock market to the real estate market but, in order to make a successful property investment everyone must have a properly devised property investment business plan.

There are a few things to know before devising a proper business plan for investments, as most of the people are unaware about the rules and regulations regarding real estate investments. Most of these rules are considered along with IRA investments in the market and violating them could have some very serious consequences with the IRS.

A properly devised business plan will allow you to have factors evaluated in order to help you adhere to the rules and regulations of an IRA investment. Following are some of the factors you must consider when devising your investment business plan.

1 Prohibited investments- when using the money engaged in the IRAs you should take some extra care as some of those can be considered as prohibited. Most of these so called prohibited investments are mostly collectible items like art, antiques, gems, stamps and coins. Though real estate directly does come under prohibited category of investments, still it can be considered as a prohibited transaction due to a different rule. Therefore, you must be very careful while investing your IRA here.

2 Prohibited transactions- under the prohibited transactions rule violations can occur whenever you choose to use your IRA in a manner that violates this clause. This rule generally prohibits the use of the IRA to buy or sell property, also disallows borrowing money from the IRA or also loaning money to the IRA, it can also never be used as a security for any loan and it is also prohibited to buy services or goods from the IRA or to sell services or goods to the IRA.

In case of any violations especially holding real estate using your IRA, even when it has been purchased legally you might get into trouble with the IRS. But with a properly devised business plan and proper IRA accounting you can actually manage this and invest in real estate using your IRA. Always make sure that your business plan is well devised and you have assessed all the possible violations before you make the investment. There are several different tools available for everyone to assess and create their business plans in order to be able to use their IRA to make investments.

By: Mike Lautensack

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The first step to becoming an expert in investment real estate is to select an area to specialize in. If you have good credit and a lot of capital money to invest then you may want to consider one of these three areas of specialization: investment in commercial property, investment property, or real estate flipping. In order to make a good living at any of their real estate investment specialties you will need to understand how that business works.

The first real estate area that you may be interested in is commercial properties. Real estate investing that specializes in commercial properties can be either a business that acquires real estate to rent to businesses, or it can be a business that develops properties to sell to businesses. If this is the area that you are most interested in it will be important for you to know the contract and real estate laws of your local area, what the commercial property market is like in your area, as well as know what commercial properties typically sell or rent for in your area.

The second area that you may be interested in is investment properties. In this type of real estate business you will acquire residential properties and then rent them out to people and families. To be successful in this business you will need to know how to draft a lease agreement, understand the responsibilities that a landlord has, understand the tax benefits of owning rental properties, and have the capital needed to both purchase properties and to cover your expenses if a property goes unrented. If you don’t want to take an active role as a landlord you also have the option of hiring a property management company to handle your rental properties for you.

Finally, if you are interested in real estate investing then you may want to consider one of the latest trends in real estate professions, the real estate flipper. In this business you will try to buy homes that need a little TLC, fix them up quickly, and then turn around and sell them for a profit. To excel in this profession you will need to know your local real estate markets, understand what home buyers are looking for, have design sense, be able to put together a reasonable budget, be able to manage workers and a timeline, and know how to close a deal. A great way to sell your flippers is to establish a good working relationship with your local real estate agents.

By: Sarah Freeland

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