Asset Valuations Explained

A postulate of sound investing is that an investor does not pay more for an asset than it is worth. Perceptions of value have to be based on the basis of facts and figures, as the price paid should reflect the future cash flows generated by the asset. Therefore it is very important to estimate the worth of the assets in which a participant is trying to invest.

Asset valuation is a method of assessing the worth of an item such as machinery or real estate or company. It is usually done either before purchasing an asset or before purchasing an insurance of the asset.

There are many reasons as to why Valuations are needed. Valuations are needed for budgeting, raising investment capital, accounting, to determine the correct tax liability for your business/company, and in litigation.

Asset valuation may consist of both subjective and objective measurements.in valuing a company, there is no number on the company’s financial statements that tells how much its brand name is worth; this aspect of asset valuation must be subjective.

On the other hand, net profit is a measurement based on the company’s income and expense figures. Some of the common methods for determining an asset’s value include comparing it to similar assets and evaluating its cash flow potential.

Valuation of financial assets is done using one or more of these types of models: Absolute value models that determine the value of an asset’s expected future cash flow projections, relative value models can help to determine the value based on the observation of market prices of similar assets and option pricing models are used for certain types of financial assets (e.g., warrants, put options, call options etc ).

In order to invest in business participants should be smart enough to determine the most accurate value of the assets.

Property Valuation Brisbane – Case Study

Valuer – Jarrad Khoury

Client – Undisclosed

Valuation – Residential Property Valuation

Location –Tanah Merah

Purpose – Market Value for Purchase Purposes

Assets – Not Applicable – Just the property itself

Comment – The client engaged The Asset Valuations Group to prepare a full valuation report, with an opinion of Market Value for Purchase Price Purposes.

Situation Analysis

A client of ours asked us as independent valuers, to prepare an independent valuation report on a residential property situated in Tanah Merah.

At the time, our client was dealing with a real estate agent, who had their own best interests at heart, they wanted to get the highest possible price, rather than assess the Market Value. The price the real estate agent was pushing for was in the low six hundred thousands.

As this is a large company, our client had decided to ensure their due diligence and engage with one of our valuers to provide them with a full valuation report. They were not confident in the asking price.

Our Valuers met with the client, and real estate agent at the premises. They photographed the entire property, and measured out the improvements for accuracy, when determining the value of improvements.

In the background the real estate agent was trying to influence the false value of the property, and the false perception of the area.

As this was a tricky report, the comparable sales were not demonstrating prices of what they were asking, they were much less.

We separated the land from the improvements, we studied the area, and we concluded the following:

• The asking price of the property was in the low six hundreds, which was excessive;
• The selling confidence in the area was low;
• $595,000 was the Fair Market Value; and
• Although the house and the scenery was great, it was not indicative of the asking price.

Our recommendation was to offer $595,000.00, and not go through with the asking price.

The client could not negotiate with the real estate agent, and the sale ended up falling through.

Although, for another $15,000 plus, they would have bought the house, it was the fact that it was an older type home, and it would take a mini market boom for it to appreciate. We saved the client $15,000 plus, and a long-term hassle and prevented the client from paying above the market value.

Our Recommendation

1. Before you decide to purchase a property do the wise thing, always seek expert advice, and do your due diligence as it can save you money and prevent an expensive mistake.
2. Do not let an individual persuade you about a price, buy with your head and not with your heart. A property is a long-term investment which you will be attached to for many years.
3. Work with someone who seeks your best interest, whether it be a real estate agent, valuer or both.

Our property valuers always work with the client, and give an unbiased opinion.

We work all over Queensland, New South Wales, Victoria & Tasmania.

[fusion_builder_container background_color=”” background_image=”” background_parallax=”none” parallax_speed=”0.3″ enable_mobile=”no” background_repeat=”no-repeat” background_position=”left top” video_url=”” video_aspect_ratio=”16:9″ video_webm=”” video_mp4=”” video_ogv=”” video_preview_image=”” overlay_color=”” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” border_size=”0px” border_color=”” border_style=”” padding_top=”20″ padding_bottom=”20″ padding_left=”0″ padding_right=”0″ hundred_percent=”no” equal_height_columns=”no” hide_on_mobile=”no” menu_anchor=”” class=”” id=””][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_title size=”2″ content_align=”left” style_type=”default” sep_color=”” class=”” id=””]Due Diligence And Why Its Important[/fusion_title][fusion_text]At some point in a Business Owner/Entrepreneurs life, there is always a time where he/she is looking at purchasing a business to add to their portfolio, or to start a new ‘ready made’ venture.

When purchasing a business, an important factor one must look at is Due Diligence. At Asset Valuations, we have experts in the field compiling Due Diligence assessments on a daily basis.

To pursue this topic further, we decided to call a meeting with one of our Business Valuers to explain the concept of due diligence further. He explained it to be an investigation of a business and in some cases of a person before purchasing a business to ensure you are making an informative decision.

Continuing this further, our business valuer explained that that the first things he assesses is the business operations (what the business does), financial performance (whether or not its doing well), legal and tax compliance (their taxes), customer contracts (contracts in place producing income), intellectual property (websites), assets (tangible operations that make the business work) and much more.

Some individuals perceive Due Diligence as a burden, but if you want to make a calculative decision and put your mind at ease to decide if this business is right for you, our solution to you is Due Diligence.

When purchasing a business, keep in mind Due Diligence and Asset Valuations. We only employ experts to give you the best advice and service.

Give us a call today to find out more.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]