Are you looking for a Selling Valuation For Your Commercial Property?
When selling your commercial property, it is essential to know how your property compares to the market’s similar properties. With the proper research, you will learn how much your commercial property is currently worth and changes you might want to make to get the top price.
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What’s your Whatcom County Commercial Property Worth?
There are three ways to evaluate how much commercial property is worth. Income method, the sales comparison method, and the cost approach. Each of the three systems to value for commercial real estate has distinct advantages and disadvantages. The ideal way for your commercial property’s value will depend on the property’s location and type. Listed are the three most commonly used forms of determining commercial property worth.
INCOME APPROACH
The income method is the most commonly used approach to determining commercial real estate value. A commercial real estate agent determines a commercial property’s cost based on its income potential using its capitalization rate (cap rate). The cap rate is the ratio of a property’s income to market value. Market value is established through analyzing like-kind commercial real estate in the area. After understanding the market, an investor estimates his property’s market value by dividing its annual income by the cap rate. As a result, if a property’s annual income is $30,000, and the cap rate is 10%, then the property is valued at $300,000.
SALES COMPARISON APPROACH
The simplest of the three methods, the sales comparison approach is based on comparing similar nearby commercial properties. An investor gathers the sales prices o several comparable properties nearby and averages all the sales prices. Using the property’s square footage under review, the evaluating property’s price is adjusted up or down based on its square footage compared to other local properties. A savvy broker further adjusts the price. They will also consider various other factors, including a building’s upgrades, age, and deferred maintenance.
COST APPROACH
The cost approach requires more complex analysis to determine an accurate commercial real estate valuation:
- One estimates the land value of a property.
- The broker determines the cost of building a duplicate of the current building and then adds the land’s value.
- The broker subtracts any depreciated value of the building based on age.
Typically, the newer property is, the more reliable the cost approach is as an accurate estimate of a property’s value.
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Hi! We’re Josh and Jolene Baijot, the creators of this website. We’re also Commercial Real Estate Agents in Washington State. Thank you for taking the time to read this blog post. We appreciate your time spent on this site. You can connect with us on Facebook, Instagram, or contact us through this website.
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