How Commercial Property Is Assessed

In the very competitive field of commercial real estate, enormous sums of money can be won or lost. It takes a great deal of attention to detail and the capacity to consider both tangible and intangible aspects while evaluating a commercial property. One way to evaluate the space’s profitability is to examine the projected income and expenses for the initial year. But you should also consider the neighborhood, the visibility of the area, and the zoning of the property.

The gross scheduled income (GSI) should be estimated. The total anticipated rent for the entire space should be added up. This method can be used to assess segmented office buildings, apartment complexes, and strip malls.Deduct five percent of the GSI. In a business building, not every unit will be fully occupied all year long. Go ahead and deduct 5% from the total GSI in order to appropriately account for this in your calculations.

Calculate the property’s net operating income (NOI). This is a number that can help you decide whether or not you’ll make a profit from a property. Get the property’s first year estimated gross operating income. Then, get your estimated operating expenses for that same time period. Subtract your expenses from your income.Calculate the property’s capitalization or “cap” rate. This is determined by dividing the NOI by the price of the property. It will result in a percentage that is the cap rate. This percentage will vary depending on the area and its real estate offerings.

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