Whether you’re in the business of buying or selling commercial property, it’s important that you are able to obtain accurate evaluations. Unfortunately, doing so is not always that easy and there is no one-size-fits-all approach.
There are, however, some more popular methods of evaluating commercial property. Outlined below are some of the more commonly used methods.
A cost-based analysis
A cost-based analysis is one of the most straightforward ways to value commercial property. Essentially, to get the total value, you combine the cost of the land and the construction costs of the building to get an approximate valuation.
Comparative sales approach
By comparing the sales of similar properties in the area, you may be able to obtain an approximate valuation of a commercial property. This form of valuation takes into consideration the area, facilities nearby, square footage and many other factors.
An income-based approached
The aforementioned approaches are often criticized because they do not take into account the potential earning of a commercial property. With an income-based approach, you take into account the previous income of the building as well as expected revenues and compare this with the expected rental costs.
Putting a price tag on commercial property can be very tricky. It may take a multifaceted approach to obtain an accurate valuation. This is a vital step for anything who is thinking of buying or selling a commercial building. Before taking your next step, it may benefit you to reach out to someone with experience in the field of commercial real estate. This will also help to ensure that everything is above board legally.