Figuring out how to price commercial property is a challenging task considering that there are many factors to think about. Depending on the specifics of your investment situation, it is recommended to use one of three methods to appraise the price of a commercial property. Here are some common approaches how to figure out costs for commercial buildings.
Use The Capitalization Approach
Using income is one of the most common approaches in pricing rent for commercial property. One way to establish value is by estimating the payment using the capitalization, or cap, rate. The cap rate is calculated by dividing a property’s net operating income by its current sales price. The Income Approach, for example, can help adjust for factors such as comparable sales and is commonly used for property that generates predictable income. However, it does not account for any future repairs or vacancies or collection loss.
The Replacement Cost Approach
This is more complicated than the income formula as it considers the value of the land on which the building is established. This strategy calculates a current value based on specific criteria but does not consider future income or comparable property prices.
The Market Value Approach
This is more complicated than the previously discussed methods. First, it considers the value of the land on which the commercial property is built. Then it feels the costs of creating a replica of that building and the land value. After that, you take the depreciated value into account and adjust the property value accordingly. This strategy calculates a current value based on specific criteria but does not consider future income or comparable property prices.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.