Скачать или смотреть Finding a Market Rental Rate

The value of a business is based on its expected future earnings. Appraisers analyze historical earnings in order to predict the future operation's results. One of the key adjustments a business appraiser has to figure out, is the market rental rate to apply to an analysis, especially when a Company does not pay any rent because it owns the rea property it operates out of.

If a business does not pay a rent expense, that means the operating profit will be larger than another similar business that does pay rent. A higher profit tends to indicate a higher value, but what happens if the business is sold, but not the building? What happens if a seller tries to sell the business but also wants to collect a rental fee for the business to continue to occupy that property?

Many businesses do not have to stay in the same location. They may move to a better spot with more traffic, they may move to someone's home, they may move to a building the buyer happens to own. In any case, the rent expense needs to be applied to the income analysis of the business, because that is how one can separate the value of the real property from the value of the business operating inside that property.

If you have further questions about this or other valuation issues, please contact me.

Shawn Hyde
[email protected]