Do You Know The True Value Of Your Commercial Real Estate?

Posted on October 13, 2020 by Anthony Donahue Baker, One of Thousands of Business Coaches on Noomii.

Whether you are planning to sell your estate, operate a business out of your property, or looking for ways to generate income, knowing how much your property is worth is certainly a good idea. Putting a value to your commercial real estate can help you determine the appropriate price for your property or whether your business operations can be profitable or not.

Here are a few tips on how you can deduce the true value of your commercial real estate.

Cost Approach

Determining the total cost to build a structure from scratch while considering the current value of the associated land is one way of approaching cost. Often, when properties are re-developed, renovated, or upgraded, the cost approach is typically applied to add on to the value of your commercial real estate. This method can significantly increase the overall value of your property.

Sales Comparison Approach

Sometimes referred to as “market approach”, the sales comparison approach simply means relying on other recent property sales that have similar characteristics as your commercial property. By researching on similar properties that are sold from the same area, you can determine a fair market value to your buyers.

Income Capitalization Approach

The income capitalization method is a way to calculate how much an investor can expect to derive from a commercial real estate. This projected income can also be determined by comparing other businesses in the area operating out of a similar property. For instance, if a building is purchased for $100,000 and the expected income is 10% per annum, $1000 can be added to the value of your estate. Depending on how long you think a business can sustain, you can determine the value of the expected future yield to increase the value of your property.

Value per Gross Rent Multiplier

Gross Rent Multiplier, in short GRM, is an approach by comparing a property’s estimated valuation and dividing it by its gross income. For example, if you have purchased a commercial real estate for $100,000 and it generates $20,000 in gross rents per year, your GRM would be 20%. This method is mainly used when the property valuation has a low market value.

Value per Door

The value per door method is primarily used for multi-apartment buildings rather than single-unit commercial real estate. This approach determines the property’s worth based on the number of units or “doors”. For instance, an apartment building with 100 units is priced at $20 million. This would simply mean that each unit is valued at $200,000.

Rentable Square Foot

Calculating the cost per rentable square footage can allow you to enhance the value of your commercial estate. For instance, if your building has an estimated area of 10,000 square feet and you are renting it out for $10 per square foot yearly, a valuation of $100,000 can be added to your overall value.

Value your Property with Professional Help

Although you might have come across similar commercial properties in your area, still, the value of each estate can vary from one another. It is important that you determine the valuation of your commercial real estate with a reliable real estate developer like A. Donahue Baker. With a personal portfolio of more than 500 units of commercial and residential properties across the country, A. Donahue Baker can certainly help you with your commercial real estate.

Whether you are looking to sell your property or go into a business partnership, feel free to reach out to A. Donahue Baker.