Expert witnesses who develop a credible opinion of value and are able to effectively articulate it help to effect resolution of cases prior to trial. Expert witnesses who develop an opinion of value which is unreasonable tend to cause cases to unnecessarily proceed to trial. The appropriate standard of care for expert witness assignments extends through all phases of the assignment. The expert should precisely determine the scope and purpose of the assignment.

All data needs to be researched and verified. In many cases, even if sales data has been previously confirmed, it will be verified a second time for the expert witness assignment. The calculations and thought process for the analysis need to be checked and double-checked, as do the report. The expert needs to carefully prepare for both deposition and trial testimony.

Appraisers sometimes believe that preparing a voluminous narrative appraisal, totaling perhaps 200 pages, which effectively documents their opinion is helpful for litigation. However, it is virtually impossible to prepare a voluminous document without overlooking minor errors. For this reason, is typically better to summarize the data and opinion instead of presenting them in a voluminous report. It is imperative that the expert witness understand that the objective of opposing counsel is to discredit the witness and their testimony.

Any aspects of the experts’ opinion, data, analysis or testimony which does not appear to be reasonable provide opposing counsel an excellent opportunity to discredit the expert witness. The expert witness needs to be an advocate for their analysis and opinion, not for their client. Novice expert witnesses sometimes succumb to pressure from clients or other parties to develop an opinion which is not reasonable, credible or supportable.

While this approach initially appears helpful to the client, it does not typically provide meaningful assistance to legal counsel or the client since it is not credible evidence for trial. Therefore, it is not efficacious for resolving litigation. In addition, opining an unreasonable opinion has a deleterious effect on the reputation of the expert witness. A credible expert witness who is properly prepared to document and articulate a credible opinion is an integral part of the team necessary to resolve cases before trial or win at trial.

Legal counsel and the expert witness need to directly discuss the strengths and weaknesses of the case. Although a credible report may not comply with the exact preference of the party or counsel, it is an effective method to provide counsel with the insights they need to effectively resolve the case. To obtain a quote or further information regarding expert witness testimony, contact us at 713-686-9955 . The appraisal division of O’Connor & Associates is a national provider of commercial real estate appraisal services including cost segregation studies, due diligence, insurance valuations, business purchase price allocation, feasibility studies, financial modeling, gift tax valuations, highest and best use analyses, casualty loss valuation and HUD map market studies. Provided by O’Connor and Associates.

In addition to the time spent planning and executing the move, it will disrupt your business. Some previous customers will believe you have gone out of business and instead of realizing you\’ve moved to a different location within the mall. Relocation clauses are another issue where the interests of the landlord and the tenant diverge. Event of Default An “event of default” is when either party does not perform as agreed upon in the lease. In some leases, the landlord has the right to terminate the lease if the tenant defaults. This can include both objective and subjective issues.

An objective issue is timely payment of rent. A subjective of issue could be a product or service offered by the tenant which was not initially contemplated.

Non-Financial Event of Default - Example

For example, the tenant initially sold skateboards but is now also selling clothing for skateboarding. (Leases often define precisely what business the tenant may perform in the retail space. From a technical perspective, even a slightly different type of business is a violation of the lease, which is an event of default.)

Financial Event of Default - Example

Most landlords and most tenants act reasonably. However, some people are unreasonable. Consider the following example. Retail space is leased at a fixed rental rate agreed upon 10 years ago. The contract rent is $15 per square foot but the market rent is $30 per square foot. The lease continues for another 10 years at the same rental rate. Due to a clerical error, the tenant forgets to send a rent payment one month. The tenant has an exemplary history of timely payment for the previous 10 years. However, this is an event of default on the lease. Instead of calling the tenant to inquire regarding the current month\’s rent, the landlord sends the tenant a notice of default. The notice of default informs the tenant the lease has been terminated and demands the tenant vacate the premises within 30 days.

What is Reasonable? A reasonable solution is for the landlords to provide written notice in the event of a default. The tenant should have a reasonable period of time to cure the default. This issue becomes more complex when it is not possible for either the tenant or the landlord to cure the default.

What if Landlord Can’t Perform? For example, a lease includes an affirmation by the landlord to comply with local laws and regulations. However, city council retroactively increases the parking requirements. (The number of parking spaces required per 1000 square feet of space.) This issue is being intensely litigated by local retail center operators. However, final resolution of the litigation is not expected for three or four years. Should the tenant have the right to terminate the lease in this situation? Dispute Resolution Most retail space leases address the venue for resolving disputes between the tenant and landlord. In most cases, the venue is state district court in either the location of the retail property or where the landlord is headquartered. The former is prevalent.

There’s a growing trend to require binding arbitration for disputes. The advantage it is a less expensive process to resolve differences of opinion. The disadvantage is forgoing some of your rights for a process which can be even more arbitrary than state district court. Right to Terminate Finally, tenants should consider providing themselves an escape clause. When starting a business, a high level of optimism and the excitement is typical and understandable. However, the actual business results sometimes fall far, far short of what was expected.

Right to Terminate - Example

For example, assume you had expected sales of $20,000 per week for your retail store and thought the very lowest level that could possibly occur would be $5,000 per week. Even though the $5,000 per week seemed like a very pessimistic scenario, you were comforted that the business would be profitable at this level. At least you’d be all the pay your expenses and pay yourself a barely adequate salary. Example Continued Unfortunately, the pessimistic scenario turned out to be wildly optimistic. For whatever reason, the stores only generating sales of $1500 per week. This is inadequate to pay your cost of operations.

What Rights Should You Require? Should you have a right to terminate your five-year lease in this scenario? If you do terminate the lease, what is a reasonable amount to pay for expenses incurred by the landlord? Beware of the Consequences Although termination clauses and personal guarantees may seem like an arcane nuance when negotiating the lease for your new business, they are critical factors. If you personally guarantee the lease and do not have an option to terminate the lease if your business performs poorly, in a worst-case scenario you are faced with personal bankruptcy or funding an operating deficit for a long period of time.

Conclusion

This concludes the article on leasing retail space. By researching best practices for your competitors, carefully analyzing the demographics and psychographics of successful stores, identifying an appropriate submarket for your store, performing thorough due diligence regarding the retail space you are leasing and carefully negotiating the lease, you have substantially improved your chances of success. In addition, you will have mitigated your exposure in the event your retail establishment is not successful.

The Market Research and Consulting division of O’Connor & Associates provides information necessary to make decision to commercial real estate professionals. Occupancy and Rental Data, ownership and management information are routinely gathered for four major land uses – multifamily, office, retail and industrial. This information allows investors to compare competitive properties, facilitate business decisions and track market and submarket performance. In addition the data is useful to brokers who for example continually monitor Houston retail space leasing, Houston office space leasing, Houston industrial space leasing, Houston apartments, Dallas apartments, Ft. Worth apartments, Austin apartments, and San Antonio apartments.
Houston Retail Space Leasing
Houston Office Space Leasing

What is a home appraisal?

A home appraisal is a survey of a home by a professional for their opinion of the property market value. In most cases an appraisal is done for a bank when a home is being approved for a loan for the home buyer. The home appraisal is a detailed report that looks at such items as the condition of the home, the neighborhood, what similar homes are selling for, and how quickly similar homes sell (to name a few). The appraisal may be a sales comparison or a cost/replacement opinion of value. There is also an income appraisal, but this is done primarily with commercial properties. The sales comparison will look at other properties in your neighborhood and what they are selling for and then figure how they compare to your home. With a cost/replacement opinion of value the appraiser is looking at what it would cost to replace the home if destroyed; this is more commonly used for new homes.
Important Note: An appraisal is not a home inspection! Appraisers only look for major concerns, they do not examine the home’s full condition (i.e. examine the roof, appliances, etc.). For this reason a home inspection should still be requested by the home buyer before purchasing the home.

Who is an appraiser? 

Appraisers are licensed by individual states and are held to strict ethical standards. Appraisers are the third party whose purpose is to give their opinion of the market value of a home. Ideally the appraiser should not be connected with anyone involved with the home transaction.

Who picks the appraiser?

When an offer is made on the house the appraiser will normally be determined by the lender. The lender may have their own appraiser or contract with an independent party. Sometimes the bank will allow the seller to choose an appraiser, but only when that appraiser is already well known to them.

Can the seller get their own appraisal done?

Yes. The home seller may commission their own appraisal before selling the property to determine cost. However, this will cost anywhere from $300-500 and the bank most likely will not accept this appraisal but request another to be done by their own contact.

If not by appraisal, how do I set the price for my home?

Home sellers can set the price of their home with the help of a REALTOR(r) using a comparative market analysis (CMA); the CMA is not a substitute for an appraisal but will give a good idea on setting an asking price (usually 5-10% more than the market price for your area).

How can you prepare your home for appraisal?

Prepare for your home appraisal like you would for a home sale. You are in essence re-selling your home. Make sure all the maintenance you can do is done; this includes clearing and trimming the yard to painting the house - hopefully most of this was already done for the sale and should at most need only a minor touch up. Be polite to the appraiser and give them full access to your home; work with them not against. Inform the appraiser of your home improvements. Let them know about the new windows, new floors, the finished basement, etc. And finally, don’t be caught off guard. Do your homework! Know what similar homes are selling for in your neighborhood. This is something that should be done before setting your selling price. But in case your home has been on the market for a month or two, keep your research current. Let the appraiser know about similar homes and what they have sold for, especially if you know why a particular home that is like yours sold for less, let them know why your house is different.

What if the appraisal is low?

An appraisal that comes in lower then the asking price can jeopardize the loan and ultimately the sale. The lender will generally only loan up to 80% of the appraisers opinion of the home’s value. The most common result is that the seller can lower their asking price. Or the seller and buyer can negotiate and meet at a price in-between. If the buyer still wants the home badly enough, they may put more money down; but this may still not guarantee their loan as the lender will still view it as negative equity. The final option is to dispute the appraisal. Before disputing with an appraisal, do your homework. Look at the homes in your community that have sold in the last 6 months and see what the differences are that may make your home more valuable. Perhaps there is a sale that the appraiser missed, perhaps other homes do not have the renovations and improvements you have done, perhaps the appraiser is not familiar with your type of home or neighborhood, etc. Building this case may be a good idea even before the appraisal. This will prevent you from getting rushed by the timeline after the appraisal is done. This is something you can ask for your REALTOR(r) to help with as they usually have a vast knowledge of your market area. Once you have the case, present it to the lender. They will likely get a new appraiser or request the same appraiser to reconsider it. If you do not want the same appraiser, make sure to specify this and ask for a second opinion.

What other aspects of the appraisal can hurt the loan?

By in far, the appraisers opinion of the home’s value being lower than the asking price is the most detrimental. However, other factors may cause the lender to refuse the loan or require further contract negotiations. These concerns would result from property conditions that may require the home buyer to do more investing in the property to keep it valuable, such as upkeep on a private road. Your REALTOR(r) can help you with these types of objections and altering the contract to meet the lenders concerns.

The above is an introduction to answer some basic questions about the appraisal process. Please look at the links to the left for more detailed information. Now, if you are interested in what your home may be worth, check out Zillow for fun! This online program uses Google Maps to show what homes in your neighborhood are selling for or may be worth. Of course, I would suggest caution as the opinion of value given for most homes is rather high: http://zillow.com/ Happy appraising!

When settlement offers were extended, the tax reduction was low; it was not worth the effort Benefits of an Informal Hearing. Most property owners appealing on market value at Harris County Appraisal District, will achieve their best result during the informal hearing in a settlement negotiation.

Taxpayers forfeit their right to an informal hearing when they elect to participate in i-Settle. For most taxpayers, i-Settle will generate a lower level of property tax savings than attending an informal hearing. (The i-Settle program is only available at Harris County Appraisal District.) Property Owners Can Protest and Win! O’Connor & Associates have long taken the position that taxpayers can effectively represent themselves at a property tax appeal hearing:

1) if they understand the process and
2) if they prepare for the hearing.

Articles on www.cutmytaxes.com explain the property tax appeal process and how to prepare for a hearing. The point of this article is that i-Settle is a poor choice for most Harris County taxpayers. The article is not intended to discourage property owners from handling their own property tax protest. When i-Settle Makes Sense Property owners should consider i-Settle in two circumstances:

1) if you are only appealing unequal appraisal at Harris County Appraisal District and
2) if you were not planning to protest and will not pay a tax consultant.

Harris County Appraisal District appraisers do not consider appeals on unequal appraisal at the informal hearing. If you just purchased your house, and it is assessed for less than the purchase price but more than similar houses, i-Settle might be worth considering.

Since the HCAD appraiser would not have considered your unequal appraisal evidence, you are not losing anything by allowing Harris County Appraisal District to make an offer via i-Settle. However, the chance of receiving an acceptable offer is small. You will probably need to attend the Harris County Appraisal Review Board hearing. Some Harris County Appraisal District property owners do not want to spend time appealing their property taxes and are unwilling to pay a property tax consultant.

(I confess, this decision perplexes me. It seems that a portion of the savings is better than none of the savings.) However, if you do not want to spend time appealing your Harris County property tax assessment and are not willing to hire a consultant, i-Settle is a good option. If you file a protest and make an offer with i-Settle, you may receive a token reduction.

Recommendation:
The best avenue for appealing property taxes is to:
1) file a protest,
2) prepare an analysis for market value and unequal appraisal, and
3) attend the informal hearing.

If you do not receive an acceptable offer at the informal hearing, you can still attend the appraisal review board hearing. Conclusion i-Settle is a poor choice for most property owners. The offers made via i-Settle have been stingy, and the settlement rate is low. The most significant drawback with i-Settle is taxpayers forfeit their right to an informal hearing.

Most Harris County taxpayers will get the best result at the informal hearing. Taxpayers can file and handle their own property tax protest. Taxpayers should appeal the assessed value of every property every year. Questions? E-mail O’Connor & Associates, or call 1-800-856-REAL. Let O’Connor & Associates reduce your property tax . Oconnor & associates can represent you at the Collin central appraisal district.

New homes have many benefits over older homes, especially when trying to sell. New home construction can incorporate many different features and amenities that are less expensive to include during the construction phase, where older homes would need to do a more expensive remodel to include the same amenities. Older homes have less resale value because they have been lived in, while new homes have that new smell, new look and “never-lived-in” quality many home buyers want. As a result, a new home can sell for 10 percent to 12 percent more than an older home.

But when the assessed values of the homes are equal or don’t take into consideration the difference in selling prices between the new and older homes, the older home owner gets assessed by the value of the newer homes. This results in the homeowner of the older homes paying more in taxes than is fair. This is called unequal appraisal. The county assumes because a new home next door to an older home is valued at a certain amount, the older home is worth the same amount also.

You have the right to protest your assessed value based on both market value and unequal appraisal. If you feel your property’s assessed value is too high, it’s your right to file a formal protest. You can protest your property value yourself, or hire a professional consultant to handle your protest for you. Either way, there’s no reason to pay more property taxes than is required by law. Questions? E-mail O’Connor & Associates, or call 1-800-856-REAL. Reduce your property tax by contacting Oconnor & associates. O’connor & associates can represent you at the industrial space rent.

The Texas law was unusual in that while rendition was mandatory, there was no penalty for not rendering. Therefore, many property owners did not render because it was not material, was not convenient or would dramatically increase their tax liability. For many small business owners, the value of the personal property and the associated property taxes are modest and not a material issue for the business.

Chief appraisers at central appraisal districts and tax entities have long been concerned that a material amount of business personal property is not being taxed. There is a reasonable concern that if business personal property owners are not being taxed equitably with real property owners, the burden of taxation is shifted from owners of personal property to owners of real property. Impetus for Change Several factors combined to make business personal property rendition a hot topic.

In Robinson vs. Budget Rent-a-Car Systems, a 2001 appeals court decision, the court clarified that the chief appraiser may sue to force a business personal property owner to render BPP. In addition to the objective of chief appraisers to equitably spread the burden of property taxation, fiscal shortfalls at many city, county and school entities as well as at the state level have raised the government’s need to ensure it is receiving all due revenue based on current tax laws. Although Robinson vs. Budget allowed chief appraisers to sue property owners who did not render, this was a largely unsatisfactory remedy due to the financial costs and political stigma of chief appraisers suing large numbers of taxpayers.

The other possible solution was for chief appraisers to \”guess high\” on assessed values in order to effectively force business personal property owners to provide information. Fortunately, few chief appraisers have chosen this option. Summary of the New Law During the summer of 2003, the Texas legislature put some teeth into the rendition law by passing Texas Senate Bill 340. Starting in 2004, a company that does not render will automatically pay a 10% penalty on its business personal property tax bill.

This penalty will be collected by the chief appraiser, although there are options to appeal the penalty. There is also a 50% penalty for filing a fraudulent rendition. In addition, filing a fraudulent rendition is a criminal offense. Rendition Requirements Owners of business personal property with an aggregate value of less than $20,000 can file a simplified rendition statement containing only:

1) the property owner\’s name and address;

2) a general description of the property by type or category; and

3) the location of the property.

Owners of business personal property worth more than $20,000 must file a rendition with:

1) the owner\’s name and address;

2) a description of the property for inventory;

3) a description of each type of inventory;

4) a general estimate of the quantity of each type;

5) the property\’s physical location; and

6) either the owner’s good faith estimate of the property\’s market value or the property\’s historical cost new and its year of acquisition.

If the owner simply provides a good faith estimate of the property\’s market value the appraisal district may request a statement of supporting information indicating how the property owner determined the value rendered. This detailed statement must be delivered within 21 days after the date the property owner receives the request.

Rendition Deadlines The rendition addresses business personal property as of January 1st of the tax year and may be filed annually between January 1st and April 15th. There is an automatic extension of the filing deadline until May 15th upon written request. The chief appraiser may extend the filing deadline for an additional 15 days (until May 30), if the property owner files a written request showing good cause.

Amnesty Provision With the new legislation the Texas Property Tax Code also offers property owners a special rendering provision for the 2003 tax year. If owners render BPP before December 1, 2003 the appraisal district may revalue the property for tax year 2003. Revaluation is likely to occur if there was no previous account for the property or if the rendered value greatly exceeds the current assessed value.

However, exercising the special rendering, or amnesty, provision in 2003 allows the property owner to avoid omitted property taxes for the two prior years. When business personal property not already on the tax rolls is discovered, the Texas Property Tax Code requires it be assessed at the market value for the two prior years. For example, if business personal property were discovered in 2003, the appraisal district would also typically assess the property for 2001 and 2002.

By rendering during the established amnesty window, September 1, 2003 through November 30, 2003, the property owner avoids the exposure of paying property taxes for prior years. What is Business Personal Property? The Texas Property Tax Code 1.04 (5) defines tangible personal property as property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has no negligible or intrinsic value.

Examples of tangible personal property, or business personal property, include equipment, furniture, computers, and inventory. Business personal property would not include accounts receivable, stocks, bonds, notes, franchise agreements, licenses, permits, certificates of deposit, insurance policies, pensions, contracts and goodwill.

Market Value Definition Market value is defined in the Texas Property Tax Code 1.04 (7) as the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

a) exposed for sale in the open market with a reasonable time for the seller to find a purchaser;

b) both the seller and the purchaser know all of the uses and purposes to which the property is adapted and for which it is capable of being used and the enforceable restrictions on its use; and

c) both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

Market Value vs. Book Value Market value may be less than or more than book value. For example, the value of a 3-month-old computer may be one-half of the initial acquisition price. The book value based on IRS tax per IRS depreciation schedule would be 95% of cost based on a 60-month depreciation schedule. Other examples of items whose market value may decline sharply after being placed in service include cars, linens and bedding at motels, phone systems, copiers, and furniture.

Other Valuation Issues Inventory shall be valued at the price for which it will sell as a unit to a purchaser who would continue the business. Due to issues such as pilferage, obsolescence, and damage, the market value of inventory may be less than the book value of the inventory. The assessed value of the furniture, computers, and equipment should be the price for which it could be sold. Issues for Appraisal Districts Although appraisal districts lobbied aggressively to insure this bill passed, it poses many challenges and issues for appraisal districts.

The first challenge is how to process a large number of renditions. Then, the appraisal districts will have to decide whether to aggressively request additional information if the owner gives market value instead of providing a fixed asset listing (property description, year of acquisition, and acquisition cost). The appraisal districts will also have to decide how much consideration to give the owner\’s estimate of market value, particularly if it is sharply below the appraisal district\’s assessed value. At least one chief appraiser believes the new rendition requirements may delay certification since appraisal districts must wait to receive the renditions before mailing notices of assessed value.

The higher level of renditions will impose additional challenges for appraisal district staff in up-front processing and will likely require additional protest hearings. Appraisal districts are generally leanly staffed and will have to be creative and effective to handle a likely meaningful increase in business personal property renditions and appeals. Practical Considerations for Property Owners One nettlesome issue for owners of small amounts of business personal property is whether the penalty for not rendering is incentive enough to render.

Consider the following example: Bob owns a small business and has business personal property reasonably worth $5,000. It is assessed for $5,000. The annual personal property taxes, based on a 3% tax rate, are $150. The penalty for not rendering is $15. Should Bob make sending the rendition form to the appraisal district a priority above working with his customers, seeking new customers, and working with his staff? Owners of business personal property who either are not on the tax rolls or whose property is grossly under-assessed will have to decide whether to render.

It is clear that the law requires owners to render and there is now a 10% penalty if you do not render; the amnesty provision provides a modest incentive to render. Consider the following example: Charlie owns a wholesale distribution business with $995,000 in inventory and $5,000 in furniture and equipment. However, Charlie\’s current BPP assessment is $100,000 and annual taxes are $3,000. If he does not render he will likely pay annual taxes of $3,000 and a 10% penalty for a total of $3,300. If Charlie does render, his business personal property taxes will increase to $30,000 per year.

It is clear that owners of business personal property are required to render and that there will be a 10% penalty for not rendering starting in 2004. Whether owners render will depend partly on their records, risk tolerance, and corporate culture. Conclusion The new business personal property rendition requirements will sharply increase compliance with rendition laws over the next three to five years.

Many small business personal property account owners will probably not address the issue until receiving a 2004 tax bill with a 10% penalty for failing to render. It is unclear how many large accounts are either not on the tax roll or are substantially undervalued. It is clear there are some, but from a practical perspective this writer has not seen or heard of many such cases. The benefits of the law are that it will make taxation more equitable between business personal property and real property.

It will also make business personal property taxes more equitable between those who do and do not render. Less attractive features of the new rendition requirements are an increase in tax revenue and an increase in paperwork for businesses. Reduce your property tax by contacting Oconnor & associates. Oconnor & associates can represent you at the industrial space rent.

I’m famous for starting a home-based real estate investment business that generated over 3.2 million dollars in equity and cash profits for my syndication partners within our first 93 days through properties we had bought, contracted or assigned. In 26 months we had transacted over 14 million dollars worth of real estate across 5 markets in North America, primarily from a laptop and BlackBerry® because of the benefits of real estate investment syndication, and the use of proven business-building processes. And, we did this with little risk. Here’s One of My Secrets to Help You Close More Real Estate Deals in This Poor Real Estate Market, With Less Effort

The secret to closing more real estate deals right now is risk management. Now, investing in real estate is not without risks especially in today\’s real estate market where many homes show for-rent and for-sale signs. And, it seems like these signs are there forever! Restaurants are practically empty and many big chains like Steak and Ale have closed. Malls and shopping centers have many more open spaces for rent than in recent years.

The economy is definitely in a pinch and many people are feeling it, especially those real estate investors who are investing the old way. You see, old-hat real estate investing requires YOU to use your credit and for YOU to use your cash. However, there are ways for savvy entrepreneurs to make a killing in today’s market! You can make more money now in the “Perfect Real Estate Storm” than what even the most seasoned real estate professionals have ever seen in their lifetimes.

But you have to find creative ways to minimize the risk when you invest in real estate whether you’re investing in commercial or residential properties. This is where real estate investing syndication comes in. What Is Real Estate Syndication and How It Will Help You. The idea of real estate syndication is pretty simple. I define it as matchmaking.

Think about it: A matchmaker or dating service finds out the needs of two different parties and matches them up for a fee. Real estate syndication is usually made up of investors who have money to invest in the real estate market but do not have the expertise required to close deals. They want to limit their exposure and minimize their risk and they do so by spreading their money amongst a number of deals and in a number of syndicates rather than just one. You, as the real estate syndicator, put the deal together and receive a significant share of the profits (between 20% and 50%) without having to invest your own money.

Using your real estate knowledge and negotiating skills, you will drive the whole real estate investing syndication business model forward and close more deals. By operating this way you can:

* Become a major player in the market without risking any of your own capital

* Build a formidable reputation

* Do more deals by leveraging this concept

* Create a fortune for yourself without using your own money.

In other words, when you transform your real estate investing business into a syndicator, you create a win/win/win for everyone involved.

More Specifically Real Estate Investing Syndication Allows You To:
1. Create a HIGHER VOLUME of deals without additional effort on your part
2. Generate a GREATR FREQUENCY of profit as syndicating your real estate investing business will enable you to systematize your business so deal making becomes a recurring cycle so you have a repeatable business model that grows geometrically
3. Get MORE done in LESS time to generate more profit
4. Produce MORE WEALTH with LITTLE RISK in a short period of time. (Remember, our business syndicated over 3 million dollars in real estate profits just 93 days.)

This is why syndicating investing is the ultimate way to close more real estate deals and make money fast. You can learn more about real estate syndicating simply by going to RealEstateSyndicationRiches.com and sign up for my new special report: 6 FIGURE Real Estate Syndication Secrets.

When you take the steps to syndicate your business correctly, you will build a 6-, 7- and even 8-figure real estate investing business. Just take a look at those who have also studied my techniques, and are growing their wealth rapidly. For example: * Using real estate syndication, J. Benson of Toronto closed 3 deals in the last month and made more than $100,000 profit in 30 days! * With just 10 hours of effort, Robert Beagle closed his first real estate deal and made over $61,000 profit as a real estate syndicator! *

Thanks to real estate investing syndication, Tom and Claudette Cooke now have $330,000 in Private Money at their disposal and they\’ve setup a business in another city they\’ve never visited before! You can experience these results if you arm yourself with the tools, information and resources you need to become a real estate investing syndicator. Real estate investor Brad Wozny, has transacted over $14 million worth of real estate across 5 markets in North America in just 26 months primarily from his laptop and Blackberry using real estate syndication. Now he wants to show you how to pocket 6-figure checks simply by syndicating real estate deals.

Even after the fiscal year ends, and business owners of improved commercial real estate are still seeking tax deduction opportunities, one popular option is to order a cost segregation study (CSS). A CSS will identify any item that can be depreciated over a shorter period of time. These studies can result in accelerated depreciation deductions for properties including new buildings, renovations of existing buildings, leasehold improvements, and real estate purchase after 1986.

Cost segregation allows business owners to increase depreciation, generate more tax deductions, and reduce their tax rate. Year 1 federal income tax savings are typically at least two times the cost of a CSS. In many cases they are five to fifty times the cost of the study. The cost segregation study is only required once. Its cost is not recurring, but the benefits are recurring during the term of property ownership. A CSS can also materially reduce local property taxes by separating real and personal property for newly constructed properties.

O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation studies, due diligence, federal tax reduction, renovation upgrading cost analyses, income taxes, tax return review and apartment inspections.

Owners of investment real estate can take advantage of a depreciation technique called cost segregation that could save them hundreds of thousands of dollars in federal income tax this year. It does so by increasing their depreciation and reducing their income tax rate from 35 percent to as little as 15 percent. It can also help defer payment of much of the tax until a building is sold. Typically, the increased depreciation in early years of ownership can offset much of the income derived from the property. When depreciation advantages expire, the property can be sold, and taxes are paid at the capital gains rate of 15 percent.

In such cases, this defers income taxes by five, 10 or even 15-plus years. In addition to asking the questions above, business owners should also ask their accountant about taking advantage of cost segregation, a tax mechanism that could generate substantial savings in federal income taxes. Although it is vastly under-utilized, cost segregation is not a wildly speculative accounting tool. In fact, the American Institute of Certified Public Accountants’ National Journal of Accountancy has published numerous articles in support of cost segregation.

Cost segregation identifies applicable components and establishes the value and correct time line for depreciation. Under typical circumstances, depreciation is spread out over as long as 39 years. However, cost segregation applies depreciation to parts of the property in 5-,7- and 15-year increments. This acceleration in depreciation time reduces the income subject to federal taxes. This method does not dictate alternative minimum tax issues.

Historically, most depreciation schedules are split between land and long-life property. Long-life property depreciates over 27.5 years for apartments and 39 years for most commercial properties. A cost segregation study can typically allocate 20% to 40% of the improvement basis to short-life categories, and sometimes more. High-income owners typically pay a 35% federal tax rate on ordinary income and a 15% rate on capital gains.

The mechanics of reporting the gain on a sale usually allocate most of the gain to capital gains, which is taxed at 15%. A cost segregation study actually reduces the amount of long-life property, which is recaptured at 25% by allocating more of the basis to the 5-,7- and 15-year property. If cost segregation is utilized from inception until a gain on the property is recognized, it can reduce the federal tax rate from 35% to 15% for most investors. The exceptions are C corporations, which pay the same tax rate for either ordinary income or capital gains. Don’t pay more than your fair share of taxes. Take all legal deductions. O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation, due diligence, renovation upgrading cost analyses, income tax, tax return review and apartment inspections.

This is particularly true where chain restaurants are involved. For example, how much would it cost to convert a restaurant built for McDonald’s to be used by Pizza Hut? Randy Dishongh, of the Mason Jar Restaurant Group, recently purchased a 8,250 square foot restaurant that has been used by another operator and altered for use by his firm. It cost $400,000 ($48.48 per square foot) to convert the restaurant. Phil Kensinger, of Kensinger & Company, recently purchased an 8,000 square foot restaurant that cost $300,000 ($37.50 per square foot) to convert his tenant’s requirements. Kensinger reports, “improvement in a restaurant built-to-suit often has little or no value to a successor tenant.”

Part of the business value developed by restaurants is dependent upon a distinctive architecture that is recognizable to restaurant patrons, who believe they can expect a reliable quality of food and service for a set price at this establishment. It is important to restaurant operators that all operating units have this recognizable architecture. It is the primary reason large restaurant operators such as McDonald’s, Pizza Hut, and Whataburger have distinctive restaurant design with distinctive signage. Signage is a good example of one of the high-cost conversion items. McDonald’s golden arches are distinctive and well serve the purpose of announcing to its patrons the presence of the McDonald’s restaurant.

However, they are not easily converted for use by another restaurant, perhaps not even with extensive conversion costs. The same is true for changing the elevation (exterior appearance), interior layouts and redoing the interior finish. The unique architecture of chain restaurant facilities makes it difficult to convert a facility built for one chain to use by another chain. It costs less to convert them from use by a major chain to a local nonchain operator.

Examples of national chains with distinctive architecture include: McDonald\’s, Pizza Hut, Burger King, Taco Bell, Long John Silvers, Pizza Inn, Jack in the Box and Whataburger. Definitions Determine Methodology The first steps in determining the proper valuation methodology includes, reviewing a series of definitions, determining how they apply to restaurants, and reviewing the laws that apply in your jurisdiction. However, continual refinement is essential to the growth of the appraisal profession. A current economic definition of market value is stated as follows: The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress. (The Appraisal of Real Estate, 20th ed., published in 1992 by The Appraisal Institute)

The following definition has been agreed upon by agencies that regulate federal financial institutions in the United States, including the Resolution Trust Corporation (RTC): The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price in not affected by undue stimulus. Implicit in this definition is the consummation of a sale of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated both parties are well informed or well advised, and acting in what they consider their best interests a reasonable time is allowed for exposure in the open market payment is made in terms of cash in the United States or in terms of financial arrangements comparable thereto the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (USPAP, 1992 edition)

1 Use Value.
The value a specific property has for a specific use.

2 Investment Value.
The specific value of an investment to a particular investor or class of investors based on individual investment requirements; distinguished from market value, which is impersonal and detached. See also market value.

3 Liquidation Value.
The most probable price which a specified interest in real property is likely to bring under all of the following conditions: Consummation of a sale will occur within a severely limited future marketing period specified by the client. Actual market conditions are those obtained currently for the property interest appraised. The buyer is acting prudently and knowledgeably. The seller is under extreme compulsion to sell. The buyer is typically motivated. The buyer is acting in what he or she considers his or her best interests. A limited marketing effort and time will be allowed for the completion of a sale. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. This definition can be modified to provide for valuation with specified financing terms. (The above definition, proposed by The Appraisal Institute Special Task Force on Value Definitions, was adopted by The Appraisal Institute Board of Directors, July 1993.) See also disposition value; distress sale; forced price; and market value.

4 How to Apply Market Value to Restaurants
The balance of this article is focused on determining and evaluating market value for a restaurant. Market value is the type of valuation performed in Texas. Value in use, or use in value, is the value a property has to a specific user as opposed to the value in the open market. Investment value is the value an investment has for a specific class of investors. In restaurant valuations, the investment value of a restaurant with a long-term guaranteed by a high credit tenant may be dramatically different from market value of the property without the long-term lease and guarantee. Liquidation value is distinguished from market value primarily by a brief marketing period. The valuation methodology discussed herein pertains to market value instead of value in use, investment value or liquidation value. The market value of the restaurant real estate should be distinguished from the sale of a going-concern. When an operating restaurant is sold it may involve the sale of real estate, FF&E (furniture, fixture, and equipment), business value, and inventory. The following are definitions for real estate, business value and going-concern value. Real Estate. Physical land and appurtenances attached to the land, e.g., structures. An identified parcel of tract of land, including improvements, if any. See also real property.

5 Business Value.
A value enhancement that results from items of intangible personal property such as marketing and management skills, an assembled work force, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements. See also going concern value.

6 Going-concern Value.
The value created by a proven property operation; considered as a separate entity to be valued with a specific business establishment; also called going value. See also business value.

7 When a restaurant is sold, a bulk price for these four classes of assets (real estate, FF&E, business value and inventory) will typically be negotiated. During the business negotiation, each party may give some thought to the different items but is typically focusing more on the net cash flow generated by the restaurant and the market value of that income stream. When the attorneys and accountants become involved, it will be necessary to allocate the purchase price to real estate, FF&E, business value and inventory. Federal income tax ramifications may affect the allocation between these items. Many investors will attempt to maximize depreciation for federal tax purposes. This will involve maximizing the allocation to building values, FF&E, and inventory. Investors typically attempt to minimize the value allocated to land and business value. When confirming comparable sales, it is essential to determine which of these elements are involved. The final set of definitions to be reviewed is fee simple estate and leased fee estate: Fee simple estate. Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

8 Leased fee estate.
An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.

9 There are three primary distinctions between fee simple estate and leased fee estate for the purposes of our analysis:

         1) contract rent paid versus market rent which could be achieved,

         2) the term of the lease, and

         3) the strength of the lease guarantor. A tenant may agree to pay an above market rental rate to induce a landlord to invest capital to build a restaurant that has a distinctive architecture necessary to operate his business and maintain a brand image.

McDonald\’s could not maintain their brand image if they simply leased restaurants built by others, which were not successful locations for the first operator. A diverse set of restaurant elevations would diffuse the brand image developed by their advertising. The primary reason that some of the restaurant rental rates are at an above market level is the cost of converting a restaurant from use by one operator to use by another restaurant operator.

Many restaurant operators view the landlord\’s capital expenditure of tenant improvements as a loan being repaid over the life of a lease. According to Randy Dishongh, of the Mason Jar Restaurant Group, “landlords expect to receive tenant improvement costs returned over the leased term along with a 10% to 12% return on funds advanced.”

Discussions with other restaurants, investors and operators indicate that the yield on tenant improvements may range from 10% to 20%, depending on the level of expenditures, their uniqueness and the financial strength of the lessee. Although 10% to 20% may seem like a high rate of return for a real estate investor, an equity investor in a restaurant business would expect a higher level of return for this capital.

Therefore, it is prudent for the real estate operator to in effect borrow the tenant improvement costs from the landlord and repay them with an above market rent as compared to raising additional equity. Choosing the Correct Approach to Valuation The final step in our analysis is to review the three traditional approaches to valuation: cost, sales comparison and income. The cost approach involves adding the market value of the land to depreciated value of the improvements. The subjective portion is determining depreciation of the improvements in a market value appraisal. Deducting the cost to change the exterior elevation, interior layout, interior finish and signage is one approach to determining depreciation resulting from the unique requirements of each restaurant operator.

Other items, which might be considered, are the leasing commission paid to a third-party leasing agent and rent loss until the property is leased. These costs can be considerable. Another approach to determining total depreciation in a restaurant is to analyze recent sales and allocate the sale price between land and improvements. If the replacement cost of the improvements is estimated and physical depreciation is deducted, the balance of the depreciation may be a good indicator of the depreciation due to the cost of conversion.

None of the traditional forms of depreciation describe precisely depreciation due to conversion of a restaurant. According to the Appraisal Real Estate, 11th ed., published by The Appraisal Institute, \”Functional obsolescence is caused by a flaw in the structure, materials, or design that diminishes the function, utilities and value of the improvement.\” Curable functional obsolescence is defined as follows: “An element of accrued depreciation; a curable defect caused by a flaw in the structure, materials or design.”

A second approach would be to treat the costs of conversion leasing and rent loss in the same manner as deferred maintenance since it is a necessary expense to prepare the restaurant for a new restaurant operator. The sales comparison approach is a direct and easily understood valuation tool. With restaurants, due to the number of elements of value (real estate, business value, FF&E and inventory) involved in a sale, the sales comparison approach requires more detailed research to prepare an accurate valuation.

It is critical to perform detailed research to separate the value of the real estate, business value, FF&E, and inventory when reviewing comparable sales. Since the allocation of these items is often made by lawyers and accountants to maximize federal income tax depreciation, it may not be reasonable to use the allocation established by the buyer and seller in preparing a real estate appraisal. Since adequate information may not be available to properly allocate value for the real estate when a going-concern restaurant is sold, it may be appropriate to use this information as a comparable sale.

Further, the time involved to estimate the business value, inventory, real estate and furniture, fixture and equipment values may be a more detailed and complex analysis than the appraisal of the subject restaurant. Selecting appropriate sales, which involve only real estate, is the most important step in preparing the sales comparison approach. It is often practical to separate the other elements of a going-concern restaurant sale from the real estate value. Sale of a restaurant building where a restaurant is no longer being operated reflects the true value of the real estate provided adequate time to market the property is available. Improper application of the income approach can result in an unreasonable value.

The most common pitfall when valuing a restaurant for tax purposes in Texas is to consider the contract rent being paid as market rent. This contract rent in most cases involves compensation for tenant improvements. This repayment of the cost of tenant improvements is often a significant portion of the contract rent. The second major item, which sometimes distorts the valuation of the fee simple estate when a restaurant is leased, is the effect of the long-term lease to a creditworthy tenant. When valuing the fee simple estate when a restaurant is leased is the effect of the long-term lease to a creditworthy tenant. When valuing the fee simple estate, the appraiser should use market rent, market vacancy, market expenses and a market capitalization rate.

If local practice involves valuing the fee simple estate, the income using capitalization rate for a creditworthy tenant. Conclusion The most important step in correctly valuing restaurants for tax purposes is determining which type of value should be utilized. There are significant differences between the market value, value in use and investment value for the same property. There are often significant differences between the market value of the leased fee estate and the fee simple estate. Calculations of the appropriate value can then be performed using relevant data.

However, controversy over proper valuation of restaurants will likely be an active topic of discussion well into the future. The appraisal division of O?onnor & Associates is a national provider of commercial real estate appraisal services including casualty loss, business valuation, cost segregation studies, due diligence, insurance valuations, feasibility studies, financial modeling, gift tax valuations, highest and best use analyses and HUD map market studies.