Benefits of A Commercial Property Valuation
We all want to get the most bang for our buck when investing in commercial property. Knowing the value of your commercial property can certainly help you in both the long and the short term, allowing you to get the most value out of your real estate investment. Taking the time to have a property valuation completed is a smart move, and comes with 5 major benefits.
What is a Commercial Property Valuation?
Appraisers research public ownership and zoning records, investigate demographic and lifestyle information, and compile comparable sales, replacement costs, and rentals. They then analyze this information as it relates to the value of the property.
The unbiased valuation of your property helps you determine how much your commercial real estate is worth in the current market. A property appraisal may be used to achieve a multitude of benefits and for a variety of intended purposes, but here we will discuss the top five reasons in detail.
1. Obtaining Finance
One of the biggest benefits to knowing how much your commercial property is worth is the ability to take out a loan against its value or to secure financing using your property as collateral. Knowing how much it is worth can help the bank to determine how much to lend you. It helps you learn how much you can safely take out against the property value, and how to navigate financial decisions regarding your real estate portfolio overall.
2. End-of-lease Repairs
When one’s lease comes to an end, the landlord may try to claim for damages, depending on the repairing liabilities of the lease agreement. Considering having a valuation done at the time the property was initially tenanted and comparing it to a valuation done when the lease expires could present useful information for determining the damages suffered by the relevant parties.
Often, in determining the value of the property, the person carrying out the valuation will make a note of the current condition of the property, the required maintenance obligations and an indication of the costs to rectify these.
3. Best Use of the Property
In some circumstances, ascertaining the best use of the property garners the best selling price. By considering the market-related rentals which can be obtained across the different commercial asset classes - for example, retail, offices or industrial - and then assessing which asset class is most suitable to the relevant property, one could potentially unlock better rental yields or attract a better quality tenant.
4. Market-Related Rentals and Expenses
A valuation allows one to assess the rentals currently being charged on similar properties in the market, and whether there isn’t perhaps scope for increasing these rentals, thereby raising the value of the property at the same time.
Similarly, the regular expenses incurred on the property require regular investigation. When summarized and considering how this impacts the value of the property, a commercial property investor is able to re-assess these costs and examine how these could effectively be reduced to further increase the value of the property.
5. Tax Deductions through Depreciation
In determining the value of a building, one needs to take into account the value of the land and the cost of the buildings.
From an accounting point of view, the cost of the buildings, excluding the land, can be depreciated in the legal entity’s financials, thereby generating a tax deduction for that legal entity.
In order to ensure that one is not depreciating the asset incorrectly and to ensure the asset is correctly reflected in the financials for liquidity purposes, the property should be valued at its current market value and reflected accordingly in the annual financials.
In summary, a commercial property valuation is a great way to learn just what your commercial property is worth. Cerberus Consulting has the right team of analysts to find the most optimal and comprehensive range of commercial appraisal solutions in the region.