Melbourne is a growing city, which is great for anyone looking to open a small business.
If you're a commercial property investor, a city like Melbourne presents fantastic opportunities. With a thriving tourism sector, more entrepreneurs are opening up shop in Melbourne. When you hold the keys to a great commercial property, you should be able to enjoy a high ROI.
Deciding which commercial properties to invest in can be tricky. In today's post, we'll explain the role of commercial property valuation in property investing and how to do it properly to maximize your income. Keep reading and learn the factors included in effective property valuation methods.
1. Commercial Property Market
The most obvious factor in a solid commercial property valuation is an analysis of Melbourne's commercial property market. Comparing the property you're interested in with other similar kinds of properties will tell you what you can charge for rent, which indicates how profitable a property will be.
When making these comparisons, finding properties that offer similar amenities is crucial. The units should be of a similar size and used for a similar function.
2. Property Location
Location is among the most important factors determining commercial property worth. If your property isn't in a desirable location, it'll be harder to find tenants and you'll need to reduce your rental rates.
The function of your commercial space matters here as well. If it's a warehouse or office space, it doesn't need to be in a high-traffic area of Melbourne. If it's a retail space, however, your pool of tenants will shrink if it's in the middle of nowhere.
3. Property Amenities
The amenities on offer, as well as the state of the property, are crucial factors in doing an accurate property appraisal. When the unit is relatively new with modern amenities and few maintenance issues, finding tenants will be relatively easy.
If your property needs work, you'll have to account for that when appraising it. If its amenities are suited to a particular industry, it'll narrow your search for tenants.
4. Financial Projections
Your financial needs must be considered. There are many methods for calculating rental rates based on how much a property is worth.
The most popular for commercial spaces is the income capitalization approach. This helps you determine the value of a property based on the amount of income it generates.
To calculate income capitalization, you must divide your net operating income (rental income minus operating expenses) by the capitalization rate (net operating income divided by purchase price.
5. State of Tenants
Lastly, you can glean a lot of information about a property's value based on how many tenants are available. As mentioned above, the commercial sector is growing in Melbourne. It shouldn't be difficult to find good tenants, depending on the type of commercial property you own.
Get Help with Your Commercial Property Valuation
These investment strategy tips should help you with your commercial property valuation. There are countless commercial real estate insights to consider, making it overwhelming and tricky to nail down an accurate valuation.
It helps to have a local real estate expert helping you. PMI Space Coast is Melbourne's preeminent commercial real estate service, helping property owners make smart investments. To get a free property valuation, don't hesitate to contact us today.
