How to Calculate and Understand Commercial Property Value?

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How to Calculate and Understand Commercial
Property Value? To determine the value of any
property, especially a commercial
property appraisal requires a lot of processes
which are done by the licensed commercial
property appraiser. This process involves a lot
of different calculation processes and the
determination of fundamental elements that affect
the property appraisals to a large extent. Thus,
to help you with the common methods of funding
the true property value in different methods,
the more real estate group is here with this
article.
1. The Cost Approach The Cost approach is used
in the valuation of properties that generally do
not fall under the market wish list. This is the
approach to finding value that is unique and a
buyer should not pay the same amount as the world
needs for its replacement. Further, the cost
approach is calculated following these three
major steps
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? Replacement Cost Calculation the very first
step involves the calculation of the replacement
cost of the property which involves the different
factors like structural integrity, designs, and
layouts of the building that were made during the
last construction. ? Depreciation Calculation
The next step is to subtract (minus)
the depreciation cost of the building due to
normal wear and tear, low maintenance, or poor
function of the building from the replacement
cost calculated in the above step.
? Land Value Additions Once you get the value
after the depreciation, it's now time to find the
actual value of land, add it to the
depreciated value, and get the actual market
value for the commercial property.
Formula Market Value Replacement Cost of the
building - Depreciation Cost Land Value
2. The Income approach This is the calculation
system that is put forward on the buildings that
generate income like retail buildings, offices,
or apartment complexes. So this income approach
technique is used to find the property value for
those properties that generate an income for
the investor. This is done through the following
steps ? Gross Income estimation Calculate the
overall income a property generates through
different modes like tenants, laundry, machinery,
and others. ? Income Steam estimation Minus all
the types of expenses from the gross income to
get the estimation of the income stream of
the property. ? Capitalization Rate Estimation
Use any method and find the cap rate of the
property which is generally the ratio of net
income generated to the value of property.
? Market Value Estimation Now divide the net
operating income from the capitalization rate to
find the property's market value.
Formula Market Value Net Operating Income /
Capitalization Rate
3. The sales comparison Approach This is one of
the most widely used appraisal techniques by the
property appraiser in Los Angeles CA,
to determine the property value by comparing the
rental value or the
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recently sold value of the property similar in
the surrounding. The steps involved here are ?
Research First research the properties that fall
under the same category which you are
appraising. ? Collect Verify Data Collect all
the data like the sold-out date, the market
value, demands, local trends, and others followed
by the characteristics of the property to compare
it with the one you are appraising now.
? Calculate market value The next step is to
calculate the market value.
In conclusion, if you are still confused about
your property appraisal and find the best estate
group, contact the Moore real estate group now
and get the best and highly assessed commercial
property appraisal with our licensed
and experienced commercial property appraiser now
in Los Angeles.