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Posted: 3 Feb 2009
Valuing real estate offices presents some unique problems. As with most professional practices they are different from other small businesses:
They are primarily service;
• Businesses that have fewer tangible assets than most small businesses.
• The experience and effectiveness of principal’s, sales, property management team are critical to the success of the office.
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The education and experience requirements to hold a real estate licence imposes a significant barrier to entry.
With any opinion of value, we believe several methods should be considered. No one method can be relied on for all real estate offices.
The set-up costs for a new office are high, but much of these may be fixtures, fittings, furniture, and computers.
There needs to be consideration given to the future profits and an appropriate capitalisation rate to the components of the business.
Of course Gross revenues and net profits are notoriously volatile in this industry and the risk factors are numerous.
Comparable market data is usually the best indicator of value – but care must be taken to compare ‘apples with apples’.
Real estate offices vary tremendously in size, marketing costs, commission payouts, services, etc, etc.
If you are thinking of selling or planning your succession then speak to our experts;
Stephen Francis Darren Richards or Ross Hedditch.
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