CXRE » Property value

Valuation Methods for a Commercial Real Estate Appraisal

Woman walking into CRE property

Real estate appraisal is both an art and a science. Brokers, agents, owners, and investors use appraisals to determine a property’s market value. At the most basic level, the market value is a property’s selling price on the open market. But how do you determine the value of a piece of real estate? Below, we’ll look at a few basic concepts which relate to commercial property values. Then we’ll review three common real estate appraisal methods: sales comparison approach, income approach, and cost approach. Basic Terms and Concepts When speaking to various commercial real estate professionals, you might hear terms like value, cost, price, or market value. But what do these terms actually mean?  Before diving into valuation methods, let’s explore these basic concepts in relationship to commercial real estate. Value: The worth of a property’s benefits to the owner over a period of time. Cost: Actual expenditures like materials or labor. Price: The amount […]

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How Commercial Real Estate Investors Can Increase ROI & Avoid Obsolescence

Everybody wants to get the most “bang for their buck.” Commercial real estate investors are no different. They want properties that make money. In this article, we explore Return on Investment (ROI) and property value. We also discuss factors that influence investors’ decisions, both now and in the future. What is Return on Investment? Return on investment, or ROI, is the amount the investor receives after paying all expenses associated with the property. Investopedia gives the following simple formula for calculating ROI: ROI = (Gain from Investment – Cost of Investment) / Cost of Investment This formula is simple, however, investors should consider a number of factors when calculating the cost of investment. Maintenance costs, leverage (money borrowed with interest to invest in a property), and the size of the investment all affect the cost. Essentially, a property’s return on investment shows determines the profit as a percentage of the overall building cost. Knowing your property’s […]

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