Valued commercial real estate in Australia requires patience and engagement with a professional that can help you consider all factors. If you are looking to buy a commercial property for sale in Australia, you will want to ensure you accurately estimate the real estate’s value. You do not need to worry about valuing the property itself too much, because a trained commercial real estate agent or property valuer will handle it all for you. Naturally, these qualified valuers will need to consider many things while assessing the value of your property. In addition to all the above, the valuers will also be using two major methods to estimate the value of your property.
For every difference between any given property and yours, a valuer will adjust your property’s total market value. In particular, if you can improve your property’s rental yield, that will be reflected directly on your property valuation. Another way to use a cap rate is to figure out what the effective market value for a property is. As much as the cap rate is a measurement of yield, it gives you a sense of the risks involved in selling the office. The cap rate essentially tells you what the return to investing in a property would be, and how that relates to properties in the same location, of the same type, and the same size.
The reasoning behind it is that it is fairly easy to calculate, giving you a readily digestible return on investment (ROI) rate to compare against similar types of commercial properties in the area, as well as against your own ROI goals. These methods generally consider similar items to the residential property appraisal, but they also consider things such as a company’s net operating profit, as well as comparable sales for the commercial property.
While similar to valuing residential properties, valuations for commercial properties are different and even the process for valuations may vary. It is usually easier to estimate a price for commercial properties compared to a residence, as the owner’s current income statements can be requested and determined the price of the property. With commercial properties, where they are valued according to their return on rent (or their potential income), an empty commercial property typically has a significant discount over an under-rented one.
Existing tenants, the length of leases, and the income generated by commercial properties are the factors that determine final values. The factors deciding commercial property values are rental income, market trends, and the appreciation in the capital of a property. Lenders typically lend up to 70% of a commercial or industrial property’s value.
A financier will use a market appraisal of a property to determine what amount of money he is willing to lend to you. Whenever you are looking to borrow money to buy a property or make repairs, your lender will hire a professionally registered valuer to provide them with an independent valuation of the property’s market valuation. If a knowledgeable broker is used by the seller, then the asking price should be set at the point at which the investor will earn an area-prevailing cap rate on the commercial type of property that he is looking at (retail, office, industrial, etc.
A primary approach for commercial property valuation is to use caution when using this method for estimating the potential value of commercial real estate. Known as comparative market analysis, the comparative sales approach involves researching commercial real estate market transactions for the past several months in the area. The comparable sales method involves direct comparisons to comparable property values that were recently sold in the area.
For the direct comparison method, a valuer will examine the most recent sales of similar properties in the past six months and compare and contrast these properties to your property. Before visiting a site (and using software and market data), the valuer will review sales data for similar properties sold in the past six months. The valuer will use kerbside assessment, along with information from online sources and comparable sales data, to establish the value of the property.
A comprehensive valuation involves the valuer going out to the property and physically inspecting the property, both inside and outside. The valuer usually takes around 48 hours to produce a three-page report on a property’s value. These benchmark properties serve as the guide for assessing the property, which allows the valuer to compare similar properties, making adjustments upwards or downwards, should any significant differences exist between your property and the sales data. The International Value Standards Board defines a property market value as the estimated sales price between the willing seller and willing buyer in the transaction.
If the property has an established name as the tenant, with a long-term lease, this would provide an assured return on investment, increasing the value of the property. Depending on how much risk you are prepared to accept, this may even provide the opportunity to purchase a commercial property at a reduced cost, knowing you could flip the property. Any kind of real estate, be it commercial or residential, could present an excellent investment opportunity. If the current rent is higher than the market rate, then you are probably paying too much for a property, and there is a little potential upside to get rents back up, thus increasing the value of capital.