The acceptable rate of return is an important variable as it will determine whether the expected purchase meets the buyer's investment criteria and whether the sale meets the seller's objective of higher returns in alternate investments. This is the income approach versus cost approach. Highest and Best Use. Real estate values are based upon the assumption of use of property to yield highest cash flow or produce the most valuable use. The value of the real estate will have an important impact on the level of potential available financing.
Creative financing can result in improved cash flow and lower interest costs.
In recent years, real estate financing has undergone an explosion in alternative types of financing, which have been further complicated by differences in commitment fees, origination costs, points, legal fees, and other matters. The challenge to a buyer is to obtain necessary financing at the lowest possible costs. The mortgagee will usually request a complete property analysis. As real estate markets are dependent on local economics, so is the availability of financing. The type of property will have an impact on the financing available.