According to Chesapeake Economic Development, Chesapeake is one of Virginia's fastest-growing cities. After all, the city boasts over 18 million square feet of constructed office and industrial space and 6 million square feet of retail space.
With the city poised for growth, now is the best time to invest in Chesapeake commercial real estate. Remember: The more its economy and population grow, the higher the demand for housing and space, resulting in more potential tenants.
Still, without proper commercial property valuation, you risk buying a low-yield real estate investment or, worse, a money pit.
So, before making any investment decision, familiarize yourself with asset valuation methods first. PMI Virginia's real estate and property management experts have shared insights in this guide, so please read on.
Importance of Commercial Property Valuation
Valuation is a repetitive real estate market analysis and property appraisal done throughout multiple stages of property ownership. Whether buying, selling, or managing a commercial property, accurate valuation helps you make informed decisions. It allows you to:
- Determine potential investment property returns and make strategic investment choices
- Set realistic selling prices
- Plan for future improvements
- Understand commercial real estate trends and conditions
Common Valuation Methods
There are several methods available for determining the value of commercial properties:
- Income Approach
- Sales Comparison Approach
- Cost Approach
Here's a quick overview of each one.
Income Approach
With this method, you calculate the property's value based on its income. Estimating potential revenue through rent and subtracting operating expenses determines the net operating income (NOI). You can establish the final value by using a capitalization rate reflecting the desired rate of return.
Sales Comparison Approach
With this approach, you'll compare your property to similar ones recently sold in the same area. It provides a benchmark for valuation based on real-world transactions. However, you must also adjust your calculations based on:
- Location
- Size
- Amenities
Cost Approach
The cost approach estimates the cost to replace or reproduce the property minus any depreciation. To give you an idea, the depreciation rate of most residential rental properties in the U.S. is 3.636% yearly for 27.5 years, per Investopedia.com.
Partner With PMI Virginia
A full-service property management firm can ease the burden of valuations because they have:
- Expertise in local market conditions
- Access to valuation tools and resources
- Ability to streamline property management tasks
- Connection to reliable local resources and contractors
So, to ensure your property valuation is accurate and in line with market demands, partner with professionals specializing in commercial real estate management. They have intricate knowledge about the community and its unique market dynamics.
Get Your Complimentary Commercial Property Valuation Today
Understanding the various commercial property valuation methods can give you the confidence to make better investment decisions. Best of all, you can get a free comprehensive analysis today with the help of PMI Virginia, our company specializing in full-service commercial property management and brokerage services in Chesapeake, VA.
Our owners, Troy and Patti Robertson have been in real estate since 1993, and Patti has been a respected broker since 2010. We use state-of-the-art technology and are proud to have the support of PMI, a national property management firm with over two decades of service history. With our skills, expertise, and innovative tools, we can help you determine your property's value and income potential.
Call us today for a complimentary property valuation!
