Appraising Commercial Real Estate

The two most common Ways to Evaluate Commercial Property

  Sales Comparison Method:

This method is commonly referred to as the "Market Approach" and is the method that analyzes prices paid for recent sales of similar properties in normal market conditions.

Adjustments are made to valuations based on positive and negative characteristics of the similar properties as compared to the subject property.

  Income Capitalization Method:

This method is the process of estimating the value of a property by discounting the value of all future net income from the property. This method is commonly used for property considered for investment purposes.

The 2 key variables in this analysis are how accurately one can predict the future net income by taking into consideration the variables of rental rates, vacancy, taxes, related expenses etc. as well as the current cost of capital of the investor.