All the Right Answers for Your Investment Efforts: How Do You Value Commercial Real Estate?
Commercial real estate properties are often the object of investment for people who have a lot of money and want to make even more of it. Investors who are serious about their goals often opt for commercial properties which can be modified, renovated and possibly repurposed for a different market niche. Whether you already have several residential and commercial real estate properties, or this is the first time you are considering a commercial real estate investment, it’s very important to keep in mind the differences between commercial and residential properties and the standards by which one would compare one commercial property to another.
Commercial vs. Residential Real Estate Properties
The main difference between commercial and residential real estate is that the latter can support regular people as tenants, while the former focuses primarily on businesses and corporations. Basically, if you have a commercial real estate property, and a business would like to use it, they will have to pay you rent for it, and your earnings will be much greater than what any individual tenant could give you, should you purchase a new residential property to attract new tenants. Aside from its physical qualities, a commercial real estate property is also valued based on its potential for attracting revenue. For example, a building located in the center of town has a much better chance to be used successfully by a local business that buys or rents it, compared to a building situated somewhere on the outskirts of town or in a bad neighborhood.
How to Value Your Commercial Property
The best way to value your commercial property is by hiring an appraiser and having a complete building inspection to make sure all the technical aspects are in good order. The appraiser will also be responsible for creating a detailed report of the value that the building has as a possible investment, and for displaying an accurate market value based on the more subtle qualities of the building, which could make it perfect as an investment for certain niches.