Matthew Trim - Ways to Determine the Value of Commercial Property
The value of a commercial property for sale is determined is depend upon the the amount of total operating income that the property generates each year. So when you are looking for a commercial property for sale, one of the first things that you want to ask the broker is the profit and loss statement. Investors need a simple but accurate way of determining both the current price and future earning potential of purchasing the desired commercial property. Determine the Value of Property for Sale: - The value of any commercial real estate is based on the amount of net operating income the property makes every year. Also each additional dollar of annual income increases the value of property to about $ 10, it is determined where the property is located and how old it is. Note that this extra net income can either come from reducing the expenditure by acquiring additional revenue in rent or managing the property more efficiently. Verifying the Income and Expenses: - To verifying the income of a commercial property ask for the rent roll. Basically, the rent roll is the list of rent for each apartment, self storage unit, mobile home lot, or office space. Make sure you get the actual rent roll because the owner or broker of a commercial property may be trying to give you a pro-forma rent roll instead of the actual rent roll for sale. Performa means you are getting the higher rents than the property is currently getting. Using the Gross Rent Multiplier: - It is a more accurate and useful tool to determine commercial property values. The information required to do this calculation involves the income of the annual gross rent, which the buyer believes it will take to pay for the purchase. For example, a property that generates $ 100,000 in gross rental income per year, which multiplies for a period of 10 years, holds the property value at $ 1 million. Using Escape Clauses to Limit Your Risk: - Another way to save yourself while looking for any property for sale is to make sure that your purchase agreement will allow you time to get out of the deal, for whatever you find you are not comfortable. Are done properly, you can often make an asset for 60 to 90 days so that you have time to accurately determine the actual value. It makes it easy to see commercial real estate, because you can leave if you have the right runaway parts. The final step is to split net operating income by capitalization rate, which is different from approximately 6 to 12 percent depending on the type of property, location of business property, age and location. Matthew Trim is a professional real estate agent and principal of CENTURY 21 Metro Realty which located in Adelaide who provide the help in new home construction, builder services, and land development. If you are facing any query related to property management or investing, then you can directly reach out to us. We would like to help you.