Valuing Real Property Asset for Resident with a Mortgage

Q One of my residents is still making mortgage payments on a real property asset. In determining the cash value of the asset, is the value of the property simply the total assessed value? Or do you subtract what is left owing on the property?

A You may deduct the principal balance of the mortgage and any other verifiable costs of sale from the assessed value to determine the value of the asset, says tax credit consultant A.J. Johnson. In other words, the equity in the real property is the asset. The equity is the estimated current market value of the property less the unpaid balance on all loans secured by the asset and reasonable costs such as broker fees that would be incurred in selling the asset.

Insider Source

A.J. Johnson: President, A.J. Johnson Consulting Service, Inc.; 3521 Frances Berkeley, Williamsburg, VA 23188; www.ajjcs.net.