Despite concerns at the national level about commercial real estate, the market in Orlando remains strong. You should still look carefully at the value of any property you're considering.
The property value helps determine the price you should pay for commercial real estate. It affects how much money you can borrow to finance the purchase and how much insurance you need. A higher property value means you can charge more in rent.
You need an accurate commercial property valuation to make the best decision. Keep reading for three property investment tips to help you get a reliable commercial real estate analysis.
1. Use the Right Commercial Property Valuation Methods
Commercial real estate appraisals can use one of several valuation methods. Using the right one for your circumstances helps you get a more accurate property value.
Market Value
The sales comparison or market value approach relies on recent transactions involving similar properties in the same market. This approach works best for properties in an area with a high volume of commercial real estate.
Cost Approach
The cost approach looks at the cost of rebuilding the commercial property, including the cost of the land. The cost approach is a good option for new properties and properties with unique features.
Income Approach
The income approach bases the property value on how much income the property could produce. The appraiser will consider the property's gross income potential compared to expenses.
Gross Rent Multiplier
The gross rent multiplier approach is similar to the income approach. It doesn't look at the property's expenses, though. For this reason, it should be used in combination with another method.
Discounted Cash Flow
The discounted cash flow method looks at the difference between the potential purchase and sale prices after a holding period. It includes factors like inflation, reinvestment potential, and lease terms. It shows you the potential value of the investment over time.
2. Use a Professional Appraiser
For the most accurate property market analysis, you need an unbiased evaluation from a professional appraiser.
Commercial appraisals are more complex than residential ones. Many commercial buildings are unique in their features and circumstances. The appraiser needs more time and expertise to evaluate how those factors affect the property value.
3. Look at the Right Data
Rising interest rates are just one of the factors that affect a property market analysis over time. A reliable valuation should look at recent information. Data points to consider include:
- Lease deals in the last 180 days
- Sales in the last 180 days
- Financing details of recent transactions
- Current rent rolls
Factors such as whether the property is well-maintained also play a role. This will give you a more accurate view of the property's value and its potential as an investment.
Navigate the Orlando Commercial Real Estate Market
Getting an accurate commercial property valuation is essential for your investment portfolio. A professional appraiser will use the right valuation methods and data points.
Once you have a reliable commercial real estate analysis, you can evaluate whether the property is a good fit for your portfolio. The team at PMI Property Alliance can help. We're dedicated to helping Orlando property investors reach their investment goals.
Schedule a consultation with PMI Property Alliance today to discuss how to grow your commercial real estate portfolio.
