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How to Evaluate Commercial Investment Property for Sale and get Best Deals

How to Evaluate Commercial Investment Property for Sale and get Best Deals

Buying the retail, office, industrial and multifamily properties under the commercial property category requires patience, skills and knowledge of the latest market price. Commercial real estate is defined as the asset class that is not a single-family home. Instead, they can be multifamily; typically, more than 4 businesses are attached in the buildings, warehouse properties, retail spaces and offices, and developable lands for further construction. Therefore, if you want to make a constant profit and generate revenue, commercial investment property for sale deals is the best way.

As the commercial properties are larger, they help you build the portfolio faster than just buying the residential buildings. Apart from this, commercial real estate has the added benefit of allowing the mortgage, investment deals and leverage options.

There are lots of factors that you should keep in mind when you are evaluating commercial properties. From the numbers you are using, the property on the paper, the tangible questions of whether it will be the office buildings, retail or multifamily, how much work you have to perform, you should have a clear idea on evaluating before you invest the commercial properties.

How to Run Comps On the Commercial Properties?

The residential properties are generally valued for the end-user on the square footage, depending upon the sales and comparable properties present in the neighborhood. Still, the commercial properties are evaluated differently.

There is a set of comparisons generally used by real estate agents to evaluate and compare similar properties. These comps are not solely dependable on the sale price, as the residential properties. You will also not find that the commercial properties are listed regularly like the residential properties. The commercial properties are specialized, and you can find them on the big listing sites like Wealth BCI, where the sellers can list their commercial properties and the buyers and readily search for the properties.

One of the common ways to evaluate the commercial property is to compare the capitalization rate, also called the cap rate, with the similar properties available. It is done by calculating the value by dividing the property’s sale price by the net operating income. You can also tell it as the annual rate of return.

However, if the property looks like a great deal after measuring the cap rate, you have to go through the below points that will help you to evaluate the commercial property further-

  • Net operating income or NOI
    The amount of income that the asset brings in after all the operational expenses, including the vacancy and loss, before the mortgage is paid. It is the amount used to measure the capitalization rate.
  • Cash flowIt is the net amount of money in your pocket after you make all the expenses and any mortgage paid.
  • Cash-on-cash returns
    It is the percentage that is measured by dividing the total amount of ash you are putting down for the property by the annual cash flow it is producing. So it is another measure of ROI.
  • Gross Income
    It is the total amount of money a property will bring in before making the expenses.

Evaluate The Property to Gain Success

There is more left to evaluate in the case of commercial properties other than just comparing the numbers. It will help if you put lots of things in place before you set for negotiation. No matter what type of property you are choosing, here are some of the points to consider while making the purchase-

  • Can The Property Be Financed?

Before looking for a commercial investment property for sale, you must know whether the property should be financed by experts and known to you. The multifamily or any commercial property needs to have the commercial appraisal and valuation by the bank when you are looking for the financing option. When you invest in a multifamily property with 4 units or less, you can live in one unit and benefit from owner-occupied financing terms, which mainly need smaller down payments and good interest rates.

  • Taking Help from The Commercial Broker

The residential property agents who help the people evaluate the residential property are usually the right people who will help you evaluate the commercial properties. However, you need to get help from a commercial property broker who has extensive knowledge and reference in this field and can help you find the best commercial property deals.

Apart from these, you should have a good network of people who will help find the right commercial properties in your area. These days, commercial property investment has become trendier due to the good interest value, higher ROI and higher profits.

If you are looking for commercial properties, you can visit Wealth BCI’s website that showcases some of the best commercial properties with good value and deals. To know the deals, talk to the agent now!