The Purchase of real estate consists of following primary elements:

(1) Real estate purchase price

(2) If the Purchase is of an operating business, include the value of
    “Good Will” and that purchase agreement.

(3) Equipment value

(4) Current Appraisal Value

The funding source will only use the Purchase Agreement Sales price to determine the maximum amount they will loan. Never the Appraisal Value.
The properties will always be valued based on real estates ability to generate income under a market rent scenario. This procedure provides insight to the projected value of the real estate, and its ability to generate rental income, should it be leased to tenants. This will be the case in the event of a foreclosure or if the owner’s business close.

Once the appraisal value is determined for the real estate value and a separate equipment value appraisal, if needed. The lender will then analyze the business to ascertain whether the business generates sufficient income to service the proposed debt. It also will conclude the financial feasibility for the tenant leasing cash flow. Therefore, the lender is assured that the debt service can be covered under both scenarios.

1. Estimated Market Rent for the occupied space(s).
2. Typical lease structure for the occupied space(s).
3. Average lease term (that is customary for the respective market).
4. Items paid by lessee (tenant) vs. lessor (landlord).
5. Improvement and maintenance cost.