Before you make a decision about the price you are willing to pay for a JAAG Properties, it is important that you consider the financial aspects. The property’s financial condition can have a significant impact on its price or interest. It is important to identify and analyse the financial aspects of any property or building that could have a significant impact on its value over time.
These are the main financial concerns that can arise from a property sale or purchase. These aren’t the only areas of concern and activity, but they are the most important in most cases.
It is a good idea to create a checklist of these items in order to make your JAAG Properties inspection and review more professional.
The Asset Schedules : The property will have many fixed and mobile assets. These assets will be listed on the asset register. An asset register that is up-to-date will be available for you to review if your commercial property has been well maintained. It is a good idea to get the asset register early in the sale process. This will allow you to see exactly what you are selling, and then it can be used later as part of your due diligence.
Personal and Bank Guarantees: Investment property includes leases and documents that support tenant occupancy. Normal leasing would require that the tenant provide some type of guarantee to the landlord for the term of the lease. This guarantee should have both the strength and the substance to cover the landlord’s costs if the tenant violates the lease terms. These guarantee documents must be transferable or reissued to the buyer at the time of the property sale. This is known as an assignment of the guarantee. To determine the type of guarantees required and the ease with which they can be obtained at the time of sale, you should speak to the solicitor of the landlord.
Capital expenditure: Major equipment and plant that are being replaced in commercial properties are generally considered capital expenditure. They are separate itemized for taxation and depreciation. The depreciation terms for different types of capital expenditure will be determined by the tax laws in your area. A computer purchased for building control will depreciate much faster than an air conditioning unit purchased for it. A detailed capital expenditure register will be included along with the date of purchase. This register will provide information about the cash flow for the next years and the depreciation it provides.
Taxation & GST: Each country and each property location has its unique tax laws and requirements regarding property, particularly investment property. It is crucial to ensure that all tax matters are properly handled and up-to-date during the sale process. Sometimes it is necessary to see the net returns for the property over the past few years, which were used to taxation statements and the lodgement process. The owner can also confirm by writing that all tax matters have been updated.
Income Analysis and Rent: The income earned by the property is the result of the occupancy licences and leases. It is important to ensure that rents have been collected in accordance to the licences and leases, as well as that all rental matters are current. This process will include checking the rent review profile as well as the expiry profiles of all leases. The price and buyer interest will be affected if the property has volatile leases or expire soon. You should carefully review all documents to verify tenant occupancy. Also, cross-reference the original documents with the tenancy schedule.
Independent Valuation Property owners often obtain a valuation to support their property financing package. These valuations are not uncommon to be done annually. They are performed by qualified and registered valuers. It is important to review this documentation before you price the property. You should also consider whether the valuation was independent at the time it was performed and how it relates to current market conditions. Some valuations used for financing purposes might not be comparable to current market conditions. Sometimes it pays to have an independent valuation done prior to or during the sale.
Land tax issues Property tax has an impact on investment aspects of commercial real property. Local legislation has a unique impact on the payment and recovery of land tax. The land tax may not be recouvable from tenants living in the property. This will immediately impact the bottom line and net returns of the property. It also impacts the price. This taxation impact can be clarified by consulting the financial advisor for the owner or the taxation officer. You should consult other tax professionals as the broker and agent are not taxation specialists.
Lease disputes It is rare that a property does not have an active lease dispute or has been affected by a prior lease dispute. It is important to inquire into the details of the lease dispute resolution. Ask for a copy or any other agreement between the parties if you are unsure. Lease disputes that are not resolved can slow down or jeopardize the sale of your property.
Mortgaged interest: The majority of commercial real estate properties will have some form of mortgage to a lender. It is important to know how a mortgage will be managed or discharged during the sale process. These matters should be clarified by the client and the mortgagee. If the property is in distress, it may be necessary to realize a certain price before clear title can been obtained.
Operational expenses: Running a commercial property requires that you spend operational funds on running costs. Similar operational expenses will be found in most properties located in the same area. However, if a property’s operational expenses are higher than the average for the area, it is more likely that the property will be difficult to sell. Property buyers are familiar with the average property expenses that are realistic for each property. Real estate agents and brokers need to be aware of average expenditures and the analysis process that should be applied in such situations. Operational expenses are analyzed on the basis $’s/m2 or $’s/ft2 depending on where you live, your monetary base and what country you’re in.