Going-concern Appraisals 


The concept of real property is relatively easy one for most people to understand; land, building, fixtures . . everything is attached and not going anywhere.  As discuss on our hotel / motel page, some properties like hotels, restaurants, c-stores / gas stations, golf courses and mobile home parks are generally sold with the real property, personal property and the business entity intact.  These properties usually have a customer base and established income and expense expectations that provide an added value above the sum of its parts.  All of the elements together are called the "going-concern" and appraiser value the value of the "proven property operation."


The income generating capacity of the of the "going concern" is usually its most important aspect.  While a sales approach and a cost approach are considered, the capitalization of the net income stream and using a discounted cash flow analysis to established the present value of future cash flows, with consideration being given to the reversion, are the most important methodologies.


Management is a critical factor of "going concern" properties, one that is often not given the weight that is should have.  Once a property is sold, the "changing of the guard" can be the beginning of the end of the operation.  Any goodwill that was built-up by the original owners can be destroyed quickly by new management that decides that their new methods are better than the established ones.  Successful transfers of "going concern" properties often include an extended training period, with the owner / seller staying in place for 6-months or longer with the new buyer / trainee.


The appraisal of a "going concern" property is difficult because it cross over into the business valuation world.  While the real property may be a significant or even the dominate asset, in most instances the market value of the "going concern" is associated with its net income.  Many real property appraisers are not trained or prepared to appraise a "going concern."   


We have provided "going concern" appraisals and consulting work to a number of diverse clients.  If you would like additional information on "going concern" appraisals you can contact us by e-mail at grigdon@cox.net or call us at 1-702-568-6699 with your specific appraisal problem.  We will let you know if we can help you with you appraisal needs.



Copyright 2007 Horizon Village Realty & Appraisal

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.