Figuring out how to price commercial property isn’t always easy, mainly because of the many options. Depending on the specifics of your investment scenario, we often utilize one of three approaches to appraise the price of a commercial property. Here’s how to start pricing commercial real estate property with the following approaches below.
This is sometimes known as the Capitalization Approach. However, using revenue to price commercial property is one of the more prevalent techniques. While this approach is practical for compensating for characteristics such as comparable sales and is commonly employed for any property that generates consistent revenue, it does not account for future repairs, vacancies, or collection loss.
The Cost Approach
This is more involved than the income calculation and is known as the Replacement Cost Approach. First, it considers the worth of the ground on which the commercial property is built. The cost of producing a replica of that building is then calculated and mixed with the land value. After that, you take the depreciated value into account and change the property value accordingly.
The Market Value Approach
This is sometimes called the Sales Comparison or the Comparable Approach. It’s the most straightforward approach, comparing your business property to others in the same market that are similar in usage and size to yours. From there, a value range can be determined, and minor adjustments can be made based on the condition of your building or other external factors. Because it is so easy, this is frequently the most straightforward technique; it is essentially what a purchaser might spend if the existing market is open and competitive. It might also be a useful starting point for talks.
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.