brainerd: The Impact of Hidden Cash Flows on Small Business/Real Property Value
- 09/17/09 10:41 PM
One of the issues I have encountered in my practice are owners that do not report all of the income from the operation. This includes, but is not limited to: C-stores Apartments - usually in the laundry revenue Resorts The impact on value from not reporting cash flows can be substantial in the end game. Let's look at an example. If a business/property hides $10,000 in cash from the tax statements, the tax savings using a 25.00% tax rate would be $2,500. Since taking cash comes directly from the bottom line (NOI), there is less revenue to capitalize for value (or … (1 comments)
brainerd: What is a Cap Rate
- 09/06/09 10:55 PM
A Cap Rate, or Capitalization Rate, is a term used in commercial real estate to describe any rate used to convert income to value or price. This rate is not a rate of return and is actually a ratio. Some weaknesses and strengths of this method are indicated below: Weaknesses:
Does not consider impact of financing Does not consider the time value of money Limited utility for making investment decisions Does not consider the impact of taxes (income) Does not account well for uneven cash flows Strengths:
Easy to understand Easily extracted from comparable sales and serves as a … (4 comments)
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Scott Lanz
Certified General Appraiser Baxter Brainerd Commer
One of the issues I have encountered in my practice are owners that do not report all of the income from the operation. This includes, but is not limited to:
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