Whether you've got your eye on a commercial property, already own one, or you're looking to sell one, commercial property valuation is a vital step in any of these processes.
Its purpose is quite simple - it tells you exactly what a commercial property is worth and why. This is a critical step in knowing whether purchasing, selling, or holding onto a property is worth your while.
But what does commercial valuation actually involve? Find out more in this blog.
Commercial Property Valuation: Covering the Basics
The purpose of a property valuation, whether it's commercial or residential, is to determine the market value. In terms of business, this process is vital for several reasons including investment analysis, financing, insurance, taxation, and more.
Accurate asset valuation ensures that all property transactions are as fair and equitable as possible for everyone involved. Here's what a commercial property assessment involves:
Preparation
A professional property valuation team will prepare a set of documents including all relevant information about the building. This includes information such as its size, location, current condition, and the intended business purpose.
They will also conduct a thorough property market analysis of the local area.
Determining the Valuation Method
Next, the team will determine the best commercial valuation method. Some of the most common include:
- The income approach: they estimate the property's value based on its ability to generate future income
- The market approach: the team compares the current property to other similar properties in the area that have recently sold on the market. They might make adjustments based on location, size, and condition though
- The cost approach: this is a formula used for new or unique properties that involves estimating the cost to replace the property, minus any depreciation, and the land value
Once they have determined the best valuation method, they can get a true feel for the worth of your property.
Property Site Inspection
This is a very important step in the valuation process. It's the best way to give a truly accurate valuation of what the property is worth. The valuation team will visit the commercial property and thoroughly assess its location, condition, and any unique, defining features.
They assess things like the structural condition of the building, any notable damages, or much-needed repair or maintenance. They'll take detailed notes, and photographs, and might even enlist the expertise of specialists to assist in the inspection of certain parts of the building.
Data Analysis
After the site inspection, the team will conduct a thorough analysis of all their collected data. The analysis will also include a deep dive into market trends, comparisons of recent property sales, and analysis of the property's income potential.
Creating and Presenting the Valuation Report
The valuation team finally compiles a detailed valuation report that they will then present to all relevant parties. This report usually includes:
- A property overview
- A detailed summary of inspection findings, key features, and any major issues
- A detailed explanation of the chosen valuation method
- A comparison of similar properties on the market
- The final valuation figure
- A final review and verification of their findings
This valuation report is usually presented to property owners (this could be you), potential buyers (if you plan on selling), investors, and lenders.
In Need of Commercial Property Valuation?
If you're new to the world of owning commercial property, PMI Sunshine State, based in Miami, is the professional set of eyes and ears you need on hand.
Finding the right professional to conduct a commercial property valuation you can trust might seem like a daunting process. But this is where we've got you covered.
Learn more about how our property management services can help you manage your tenants and commercial property from start to finish.
