The salvage value of an asset is it’s estimated value at the end of it’s useful life.
In the real estate industry, salvage value usually (if not exclusively) refers to the value of property at the end of it’s useful life.
You need to know: What lenders hope you never learn about mortgagesIt can be especially relevant for leasehold property.
This can be a crucial factor in determining how much an investor would be willing to invest in improvements like remodeling and smart home technology.
Because why put so much money into something that can eventually become worthless?
Salvage value can also be an important consideration when demolishing a building to build a new one is being considered by the landowner.
In valuation, an appraiser estimates the useful life of a property and estimates the salvage value at the end of that estimated lifespan. Then depreciation is calculated based on the whole cost of the building less the salvage value over the useful life.
You May Also Like.