DIY Commercial Property Valuation

DIY Commercial Property Valuation

Editor

The Editor is also the Founder of The Passive Investor website. He is a part-time practising General Practitioner (GP) with an interest in all financial and investment-related topics. He is particularly focused on the integrated use of residential property, commercial property and the sharemarket to develop effective financial strategies for wealth accumulation and distribution.

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To avoid paying for a valuer to do a valuation every time you find a commercial property you may have interest in, it is worth having a few approaches to help you come to your own valuation prior to making an offer.

The simplest approach is to ask the listing real estate agent what comparable market rents are and if they know of any recent comparable sales nearby and what capitalisation rates they sold for.

It’s also worth asking them about vacancy rates at the same time, though you can also get an idea of this by looking at how many comparable properties are advertised online for sale or lease and are vacant.

Looking at asking sales prices and rents on properties for sale and also asking rents on properties for lease online will also give you additional information.

Another approach is to ask a local property manager or valuer to give you an idea of market rents and capitalisation rates, with a view to using their services if you make an offer on a property that gets accepted.

In broad terms, we feel that establishing the market rent for the type of property you are interested in, and whether the current rent being paid by the existing tenant at the property (ie. the “passing rent”) is above or below the market rent is one of the more important things to establish at the outset.

This blog post is just a very brief introduction to this topic, and we will go into more detail about this in future posts.

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