Florida is home to some of the hottest commercial real estate markets in the nation. While St. Augustine may not see the same level of traffic as Miami or Orlando, we still have a thriving market for commercial investors.
As you assess your plans for next year, it's time to consider a new commercial property valuation. Whether your commercial property has appreciated or depreciated in value, a true evaluation can help you set reasonable and competitive rental rates.
What factors should you consider in a commercial property valuation? What impact will this have on rental prices? Read on to find out.
The Sales Comps Approach
One of the most useful and approachable commercial property valuation methods is the sales comparisons approach. Also known as the market approach, this method involves looking at comparable properties that sold in the last six months to get a general sense of value. The goal is to find properties with a similar:
- Location
- Square footage
- Age
- Acreage
- Type of construction
- Industry of use
- Size (e.g., low-rise vs. high-rise)
Take into account any maintenance and repairs you've recently completed or that you need to perform. Steady, preventative maintenance can not only preserve but increase your property value over time.
A Note on Cap Rates
Sales comparisons can help you to understand the value of your property in the real estate market. Capitalization rates can help you to understand the value of your property to you as an investor.
To calculate your cap rate, you'll first need to calculate your commercial property's annual net revenue. Broadly speaking, this is your gross rent minus any costs you have to reinvest in the property. You will also need to calculate your commercial property's full cash value, which you can estimate using the sales comps method.
Divide your annual net revenue by the full cash value to get your cap rate. A word to the wise: while higher cap rates may yield more rental income, they also yield higher risk.
Charging Competitive Rent Rates
Your latest commercial property valuation may reveal some hard truths about your income stream. Maybe you're not making as much as you anticipated or you believe you could be making more based on your property's value.
When you're looking to better manage your investment portfolio, don't underestimate the power of charging a competitive rent rate. Limiting vacancies will almost always yield higher profits than collecting higher-than-average rent from a handful of commercial tenants.
Call PMI for Professional Commercial Property Valuation
Conducting an annual commercial property valuation can better prepare you for the future ahead as a St. Augustine real estate investor. How profitable is your commercial property as you continue to rent it out? How profitable would it be if you sold it today?
At PMI Ancient City, our goal is to make every option a good one. Our commercial property management services will ensure that your tenants are happy and that your property value is high when you're ready to sell. Contact us today for a professional property valuation and more.
