Real estate is the world’s biggest store of wealth by far, representing around half of all wealth [1]. And its growth rate has been staggering, since Hernando de Soto reported in The Mystery of Capital (2000) that real estate then represented about half the wealth in the developing world, and a quarter in the developed world [2]. It’s even more dominant now.
​
A great deal of attention is, naturally, placed on valuing real estate—for financing, taxation and simply knowing the worth of one’s principal assets. So far so good. But a lot of real estate is in the hands of multiple parties, held through partnerships and other legal ownership structures. We have developed many methods for valuing the real estate itself, but what about individual undivided or fractional interests in that real estate? Is someone’s 10% interest in owner’s equity (the real estate asset less any debt, and adjusted for other assets and liabilities held by the partnership) actually 10% of total equity? The real estate’s market value is determined as if the entire property were sold. But what about when the 10% transfers by itself, and the real estate remains in the partnership?
​
An easily adopted application
Technology has been available for determining the market value of such fractional ownership interests, but the various methods were awkward to apply, and more difficult to understand. Dramatic advances in technology have now changed everything, using income approach-based methods that can be applied by valuers everywhere [3][4]. This is revolutionary. This new valuation technology is understood by both business valuers and real estate appraisers. It can be adopted with relatively little effort by using PrimusPVX®, a platform that guides the valuer through the entire process, and uses a patented and transparent algorithm to take care of data application and calculations. Long multidisciplinary experience is no longer needed.
​
New and future business
There are large numbers of real estate-owning families everywhere. You almost certainly have existing relationships with them, making these clients your key to easy and profitable practice diversification. You can help greatly with partner buyouts, disputes and compliance valuations with the same high quality valuation work that they have come to know through your appraisal work. No compromises.
​
Tax compliance requires accurate valuations for financial benefits. But future success requires something else: logical, transparent, and easy-to-understand valuations. You are trusted, and will have opportunities to help your client families keep their holdings together, and assure successful property ownership for future generations.
​
The basic concepts can be learned in a single four-hour seminar by Zoom, or a live all-day seminar. Contact the author here or on LinkedIn to explore how to do this for your association or firm.
​
​
FOOTNOTES
[1] Paul Tostevin, The Total Value of Global Real Estate, (Savills, September 2021) https://www.savills.com/impacts/market-trends/the-total-value-of-global-real-estate.html
[2] Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Basic Books, 2000)
[3] Dennis A. Webb, Valuing Fractional Interests in Real Estate 2.0. (Milonguero Press, Los Angeles 2021). https://www.primusivs.com/book-page
[4] PrimusPVX, an online fractional interest valuation platform.
https://www.primuspvx.com
Stay connected for more current and critical updates through our newsletter. If you have not already, I invite you to SIGN UP HERE.
​
Copyright © Dennis A. Webb, 2024, All rights reserved.