Which components are subtracted to determine the reversionary equity value?

To determine the reversionary equity value, it is necessary to subtract the outstanding loan balance and disposition costs from the estimated selling price of the property. This approach effectively reveals the net amount that an investor could expect to retain after selling the property, factoring in what they still owe (the loan balance) and any costs incurred to dispose of the property (like selling commissions and legal fees).

In general, reversionary equity value represents the potential cash flow upon sale of the investment, minus debts and additional expenses. Subtracting both the outstanding loan balance and disposition costs gives a clear picture of the actual proceeds an investor would realize, making this a critical understanding in real estate investment and valuation. This ensures that an investor can accurately assess their financial position and potential returns in a commercial property scenario.