Evaluating Commercial Property Value

Property investment can be lucrative and financially-securing, but it must be done with the proper precautions in place so that your investment winds up being helpful, not harmful to your future. Obtaining a commercial property is a huge accomplishment that should certainly not go overlooked; however in order to ensure that you’re making a solid financial decision, the first important step to take before purchasing or investing in a property is to determine its value. The value of a commercial property greatly differs based on several different factors, including the type of commercial property and the surrounding environment or community. In this article, we’ll go over the different ways that one can evaluate the value of a few types of commercial properties.

Property potential

Using this method of determining a property’s value, the property’s value is calculated with some simple formulas. First, the set price of the commercial property is divided by the gross income. This will help determine whether the property is a “smart” financial investment long-term. In other words, will the expected profit of the property outweigh the initial costs significantly?

Value per unit

Apartment buildings with multiple units are often overlooked by commercial investors for several reasons; but the truth is that they can be extremely lucrative investment opportunities if the value is right. Valuing such residence buildings based on the number of units the location has is the primary method used by commercial investors. For instance, if a property has 10 units and is priced at 2 million dollars, simple calculations determine that the price per unit should be somewhere around $100,000 dollars. Unfortunately these types of calculations rarely take into consideration the neighborhood and other attributes of the building.

Expected income

Similar to determining a property’s potential, this method of value calculation utilizes the property’s projected income. This can be achieved by comparing the property in question to others in the area that share similarities, or from projected lowered future costs with new ownership – such as cutting back on unnecessary maintenance costs. This is a helpful approach for investors who plan on taking a more hands-on approach in managing their investment.

Market method

As the name implies, this method of calculating commercial property value is highly dependent upon considering the value of other commercial locations in the area. Similar to buying a house, you’ll be looking to compare the value of your potential investment to similar properties surrounding it that have either just sold or are still on the market. This will supply you with the “fair market value” of the property.

Cost “from-scratch”

Sometimes using the market method isn’t quite as straight-forward in certain cases. In such instances, it’s helpful to consider what the cost of the building might be had you built it from the ground up today. You’ll want to consider the cost of building materials, labor, land, and other factors that would go into re-creating the same building as it stands.

For a fair price, enlist the help of professionals

The commercial property industry can be cutthroat and tough to manage without the proper tools and information. If you’re having trouble determining if a commercial property is the right choice for you or your company, it’s best to ask for professional help before jumping into a commitment. The most important thing in any investment opportunity is to pay a fair price for the property so that you can profit from it – this is the basis for a smart financial choice. Involving a third party may not seem ideal to some, but it’s often the best way to avoid being taken advantage of in one of your most financially vulnerable moments.

A wise philosophy on commercial property

Martin Landis, CEO of Landwin LLC Real Estate Advisors, is known for his establishment of one of the world’s most profitable and successful real estate investment companies in the country. With offices based in Encino and Century City, CA, Landwin has connections to some of the most lucrative commercial properties in the nation, and continues to expand investment opportunities for investors daily. Assessing commercial property value is a critical first step before investing, and Martin Landis has established a helpful and effective service for doing so. If you are considering investing in commercial property, please get in touch with Landwin professionals to help you make a sound business decision.

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Martin Landis

Hello everyone! It’s Martin Landis here. In my role as the Managing Member (CEO) of the real estate advisory firm Landwin, LLC, I draw upon my many years of business experience in real estate and marketing.