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Commercial Property – How The Market Value Is Determined

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Commercial property investment needs a negotiation for a great price. You need to understand the way these properties are appraised, to know what to expect.

Investing in commercial property can be a very self-sustaining and lucrative venture. Just like with residential real estate, you can have your tenants pay your mortgage bills for you. If you buy a larger building, often you can have several renters and your investment profits will be even greater. As you look into buying some commercial property, it will be important to get an appraisal of the fair market value of the purchase. This can be provided to you by a licensed appraiser, but it may also be helpful for you to know, how that commercial property market value is determined.

Calculating the value of a commercial property is not as simple as appraising the value of a residential home or apartment building. With residential properties, the value is determined by the condition of the home itself, compared with other homes with similar square footage and lot space in the same area. With a commercial property, the size and the condition of the actual building are still taken into account, including the state of things like the plumbing and heating and roof. But appraisers have to use other indicators to establish the value, because there are not usually many properties of exactly comparable size and location. Comparisons are still used in a general sense by investigating the costs of similar nearby buildings, but there are several other factors that are even more important in determining the market value.

One of the factors that most determine the worth is the market area of the property. Properties that are centrally located within the city limits with good transportation access will obviously be worth more than those that are located farther away from town and are harder to get to. This is because it is worth more to tenants to have their employees and suppliers nearby. A prime location is also valued higher because potential customers will pass the building regularly and have a greater chance of becoming real customers if it is in their normal path of travel.

Another very important aspect that determines the commercial property market value is the potential for rental income. If the building is well located, it will attract more tenants, making the property more valuable. If the building has several spaces for renters, it will be valued higher, because there will be several tenants to generate owner income. The ability to make more money from the property translates into a higher value (and price.)

Finally, commercial property market values are established by considering how many other properties of similar size, state, and income potential are available in the area. If there are plenty of comparable properties in the market, the value will be lower, but generally if a property offers more space or better location than most of the nearby buildings, it will be worth much more. This is because it will typically be able to attract tenants very easily. While commercial property values are determined differently than residential properties, the contributing factors are easy to understand and look for. Knowing the way commercial properties are valued can help you in picking the best spot for your investment!

Commercial property investment is a vital task and is very lucrative venture. It is advisable to understand how its value is calculated and which factors affect it. To learn more on commercial property analysis, visit KISCL online at http://www.kiscl.com.

Commercial Property Analysis Make or Break the Deal

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Savvy investors know that they need to know all they can about a property before securing a loan. A commercial property analysis comes in handy and is necessary for a lender to consider an investment loan.

Article When you consider investing in commercial real estate, it is very necessary that a commercial property analysis has been conducted on the site you wish to use. Incomplete or shallow research can break the deal on any prospective location. Such analyses are performed by professionals who know what to look for.

In commercial property investment, there are many factors that influence the decision as to whether or not a lender grants a loan. Those factors range from local zoning laws governing the area to the socio-economic composition of the community surrounding the location. All of these considerations are made with an eye towards a successful deal. Knowing how your business contributes to the cultural, social and environmental area is the first step to securing a profitable deal.

The necessity of knowing all about a business before it is established at a location is critical. Commercial property analysis professionals will evaluate a multitude of influencing factors for you so that you can decide whether or not to pursue a loan for that particular site.

Time and effort are valuable commodities in real estate transactions. Time is, quite honestly, money. You should be confident that your time is being well spent when you contact your sellers, lenders and/or brokers concerning a site that you are interested in. Wading through the analysis information is time consuming and may cost you the deal if the investigation is not done thoroughly.

Securing your loan is a critical goal if you are going to have a successful career in commercial property investment. A thorough analysis of the property you desire contributes to a successful transaction with your lender. During these financial considerations, a mortgage broker can also be as beneficial as your community property analysis.

A mortgage broker is familiar with the lender and borrower relationship and does his or her best to see that your application for a loan gets to the right hands. Still, without an accurate accounting of the target location, your broker will have difficulty securing your loan.

A complete commercial property analysis will inform you about such things as the potential effects of the business on the community, the future success of your investment, the potential for growth and the success of surrounding business. All of this data is critical in the decision process of the lender and should be as critical in your decision to invest. The due diligence of such an analysis offers information on the condition of the land and the surrounding area, the socio-economic climate (which can greatly influence your success), and the possibility and likelihood of a profitable endeavor.

Securing the appropriate documents for your commercial venture can be a veritable mountain of work to accomplish on your own. Working smarter in the real estate industry allows you to maximize your time. Your selection of lucrative properties and completing the process with each of them is dependent on the work you have done to set up the deal. Generating profits from your investments is critical for you to be able to continue investing.

Taking advantage of the available assistance, such as having your commercial property analysis conducted by a professional, employing a broker or using investment property software can make your endeavors easier to complete as well as make them more lucrative.

Commercial property investing is a multi-step process than can be complicated if you are not familiar with it. An accurate commercial property analysis can tell you if you are pursing success or failure. Visit the professionals at KISCL for their expertise. http://www.kiscl.com

Successful Commercial Property Analysis

Property blogger

As a successful property investor, you will want to make a commercial property analysis of any real estate deal before you consider making a purchase. There are many factors which you should take into account while making your property analysis.

Article:

As a successful property investor, you will want to make a commercial property analysis of any real estate deal before you consider making the purchase. There are many factors which you should take into account while making your property analysis. Some of these factors which you should look at are: the location of the property, the price, taxes, local government and zoning laws, potential rental income, as well as the options you have for obtaining the property using an investment property mortgage loan.

Commercial property has many guidelines and regulations which must be followed. The last thing that you want to do is purchase investment commercial property, and then find out once you own it that you cannot lease it to the business you want, or that zoning permits you from using the property how you would like to. Whenever you are reviewing a commercial property analysis, it is vitally important to find out about the local governmental rules and regulations which will govern what you can and cannot do with the property in question. Look at what you had planned for the property and make sure everything is in agreement.

Taxes can be a big consideration when you are making a commercial property analysis. Some local areas offer tax incentives for commercial property owners and to certain businesses. If your property can meet the guidelines then you could possibly see a nice tax reduction. Also, if the area taxes commercial real estate at a high rate, you could be in for a real surprise if you did not consider taxes in your commercial property analysis.

Just as there can be tax incentives to buying commercial property in a particular area, the same can be said for financing options. Many commercial lenders have programs which fit a variety of different business and community needs. If your property qualifies you can see a nice reduction in your mortgage interest rate.

Another consideration is the rental rate of other commercial properties in the area. If many properties are sitting vacant that is a sign that you may have serious trouble renting to a business and keeping them for the long-term. This is important for your commercial investment analysis because the rent money is your income on the property.

In addition to all of the above considerations, the usual considerations still apply. You need to look at the location of the property and determine if it is in a good enough location for what it will ultimately be used for. What is the area around the property like? Will people likely come to the location if a business starts there? Who are the residents of the local area and will they benefit from your property’s use?

You will need to look at the land and buildings and determine how much work and cost is likely involved in bringing things up to code and working order. Look at the offering price and consider if it is reasonable or if it needs to be adjusted because of the things you have found while looking at the other factors for your commercial property analysis.

While performing a commercial property analysis you should take all of the above into consideration. You also might want to consider hitting the pavement and talking to people in the area of your potential property purchase. See what the people who already live and work in the area think about the property.

** About the author :

Get the best commercial property analysis tools with software from KISCL, http://www.kiscl.com/. Our software has all of the tools of seasoned real estate pros to help you navigate the commercial market. With our program you can analyze your property instantly and know the deal is right!

Decide Commercial Property Market Value Before Investing

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Commercial property is often used as a source of profit for investors. It can provide great returns with a minimal amount of work. If you are interested in buying commercial real estate, it is important to determine how much the property is worth in terms of market value. This way you will know whether a certain piece of land will be a profitable investment or not.

What is a Commercial Property? Commercial property consists of buildings and land that is specifically zoned for business uses, and not for residential living. This includes all sorts of establishments like industrial buildings, offices and hotels. Things like hospitals, malls, golf courses, self-storage units, and independent retail stores are all meant for commercial purposes. They generate profit for investors either through rental income or from capital gains, when resold at a higher price.

Use the Gross Rent Multiplier (GRM) to Determine Value The value of a commercial property is based on several factors. For instance, more the building generates rental income the more valuable it is in general. This is affected by the location, whether it is in a busy popular area of a business district or whether it is on the outskirts of a town, easily accessible or just out of the way. The property’s worth is also determined by the value of neighboring buildings as well as how much of the similar type of real estate is available in a given area.

Certainly you can find out the market value of the commercial property by hiring a real estate professional, but you can make your own quick calculations to get a rough idea about the worth of a particular estate. This can be done by using this formula:

Market Value= Annual Gross Rent * Gross Rent Multiplier

To use this formula you will obviously need to find out some basic information about the land from the seller or from real estate agent listing the building. You will need to find out how much revenue the property brings in each year in rental income. That is the annual gross income.

The GRM is a ratio of a property’s sales price divided by its annual gross rents. To determine the GRM on your own, you need to get hold of a several listings for properties that are similar to the one you are considering. You find the GRM or each one and average them all together.

Once you have the GRM you will be able to figure out the approximate market value of an investment property. For example, if you know that the its rental incomes total is $100,000 for the year and the average GRM for similar properties is 8, than the value of your prospective investment land is $800,000. Using this formula is pretty accurate, and it will help you as you try to narrow down your selection of buildings to buy. Yet when it’s time to actually buy the building, you will need a professional appraiser to satisfy the requirements of your investment loan.

Commercial property investment is a vital task; hence determine the property market value before investing in it, in order to ensure a profitable investment move in terms of capital gains and rental income. KISCL program will assist in the dealings, visit http://www.kiscl.com.

Commercial Property Investment Values Remain Stable

Property blogger

Investing in real estate has generally been considered as a relatively safe and profitable venture. Over the past few years however, the housing market has proven it is not immune to volatile ups and downs nor it has been safe from speculators and scheming fraudsters. Fortunately, during the same time, commercial properties have largely escaped the chaos and ruin that the residential market has experienced.

In fact, a recent study by Deloitte Consulting LLP, a subsidiary of the financial accounting firm Deloitte & Touche USA LLP, found many reasons to believe that commercial values are fairly consistent, making them a great real estate investment choice.

-In prior boom cycles, commercial real estate has responded by overbuilding. The industry has clearly learned its lesson because this time commercial real estate is enduring a credit crunch – not a crisis – partially because it resisted this urge. No doubt, the industry is in a strong position to withstand a recession, should one occur, and commercial real estate remains a viable investment option for those seeking to diversify and insulate their portfolios from market volatility,- said Dennis Yeskey of Deloitte’s real estate capital markets practice, as quoted in a press release on the company’s website. -Capital flow will return in 2008, with the exception of highly leveraged deals, and new opportunities are being sought in distressed debt funds, niche opportunities, and global markets.-

The -Real Estate Capital Markets Top Ten Issues – 2008- study found that although profits have been skimmed as the residential market has failed, commercial property investment values have held steady in many places, and have seen modest growth in others.

Plus, the surveys detailed, because of the shakeup in the housing market, mortgage underwriting rules that were also becoming too loose in the business world are now being examined and revised. The result is that investment loans will be safer, with less risk of fraud.

Another finding is that investment values have been strong in the office and industrial segment of this market, making them a much better investment at this time than retail properties or multi-family dwellings.

Additionally, funding for commercial property investment is much more readily available today than it is for residential real estate purchases. Of course, large down payments are still required as well as well-documented sources of income and assets, but the study found that lenders approve conservative commercial property investment loans quite often.

While some shifting of prices and expectations still need to take place, the study concluded that commercial market values have shown good stability and potential for pretty profits.

Going forward the study said, -Investors would do well to stop comparing CRE (commercial real estate) returns to the previous few years’ performance, and to take a closer look at how these returns fit into the bigger picture. Returns will probably be lower, but when compared to other investment categories (stocks, bonds, etc.), CRE remains an attractive investment vehicle due to its stability and opportunity for diversification.-

The Commercial property investment potential and analysis from KISCL will help you to get the complete resources and analysis on real estate and its dealings. Learn more on real estate, right here. Visit http://www.kiscl.com for more information.