Profits method

This method is sometimes known as the method of accounts and is built on the assumption that the values of some properties are related to the profits resulting from their use.

The principle of this method is derived from the property’s ability to generate income for the tenant from its occupancy, which will adequately compensate him for operating the facility.

In addition to offering a surplus that the tenant is willing to pay for the right to occupy the property.

The principle also means the ability of ownership to provide a profit to the tenant, which will adequately compensate him for his operation of the facility, in addition to providing a surplus that the tenant is willing to pay as rent. For the right to occupy the property, this method is used by an accredited valuator in the absence of evidence of rent or price comparison, and the tenant’s account provides the appropriate evidence. This may be a monopoly element of ownership.

This method seeks to estimate the rental value of the property, applying the investment method according to the rental value in order to obtain capital value.

The difficulty of this method lies in obtaining reliable numbers and determining the share of net profit returned to rent. It is necessary to audit the accounts when analyzing them, in order to determine the following:

A. Whether or not they reasonably represent the performance of the qualified operator.

B. Whether or not all expenses are properly permitted.

C. Whether or not adequate allocations have been made for expenses.

Using the dividend method is usually sufficient when:

1- Absence of sales or evidence of rent.

2- The presence of a sufficient element for the legal or de facto monopoly of the establishments.

3- It is often used in valuating machinery and equipment such as quarries, railways, ferries, and ships.

Asset Experts Professional Consulting Company is pleased to provide its services in valuating real estate, machinery, and equipment. We will provide you with an approved valuation report. For more details about the valuation, we are happy to contact you on the number: 0555550431.