Investment property valuation

Investment property valuation

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I have acquired an LLP client with a substantial investment property portfolio. They have provided their last five years of accounts and as far I can tell the properties are on the balance sheet at the original cost and have not been professionally valued since construction which was completed in 2007. All of the rental income and a little more goes to repay the mortgages and the partners are extremely reluctant to fund a professional valuation as the cost is somewhat prohibitive. My concern is that the portfolio is probably worth considerably less than the balance sheet value and I am unsure if I should accept a valuation estimate provided by the partners as it will probably be overstated. What would you do in my situation? 

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By pauld
06th Jun 2014 10:22

Can't you just ask them

What they think the properties are worth? In my experience anyone involved in property development has a very good idea what they could achieve on the open market should they decide to sell. You could ask them for range of values and  thendecide whether to use the lowest, highest or mid range values.

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Replying to lh3f9764bg1g:
By johngroganjga
06th Jun 2014 10:42

Clients' decision

pauld wrote:

You could ask them for range of values and  then decide whether to use the lowest, highest or mid range values.

Disagree that the accountant should choose the final figure.  It must be the clients' valuation. 

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By johngroganjga
06th Jun 2014 10:29

Unless you are auditing the accounts it is not for you to "accept" or otherwise the partners' valuations.  Firstly you need to advise them of what the accounting standards require and that hitherto they have signally failed to comply with them.  Presumably you have done this already.

You seem to aware that there is no requirement for the valuation to be independent or professional.  if the partners do not wish to incur the expense of  professional valuation you just need to advise them of the importance of their own valuation being as accurate and robust as they can make it, and that they should keep a record of how that have arrived at their figures.  Then you just ask them what their figures are, and get them to confirm them to you in writing.

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By razertoo
06th Jun 2014 10:36

@pauld @johngranga

Thanks guys. I appear to be worrying unnecessarily

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By johngroganjga
06th Jun 2014 10:44

You just need to be careful that if the valuation is wrong it's the partners' problem and not yours.  So you just play a straight bat.

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