I am looking at an 800sq.m. commercial property in North Ipswich which has a national tenat with a solid lease. The UCV is approx $335,000
What is a realistic purchase price given it is a concrete slab building in very good condition with 2 street frontage (corner block with one street a main commuter street).
What is the Gross Annual Rent.
Com Properties are valued based on their rent return.
Does the Tenant cover all of the out goings ?
A few points to give you an better understanding of how to value it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:What is the Gross Annual Rent.Com Properties are valued based on their rent return.
Does the Tenant cover all of the out goings ?
CIP are valued on a basis of net income/yield (gross can be anything within reason).
Cap rate is not the only methodology used for commercial property however a back up method should also be used eg residual land value/comparables etc.
Yes totally agree valuation is based on NAI.
There are normally 3 methods of calculating a value which gives a balanced approach.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Gross annual rent is $73,000 and tenant covers all outgoings
The best methods for valuing commercial property are:
1. Cap Rate
2. DCF Approach
3. Recent SalesI would recommend 1. and 3. At least 2 methods need to be used. 2. might be a little complicated and requires a lot of assumptions.
3. Find similar commercial property sold prices per sqm and apply them to your property. You can use this website which is free:
http://www.realcommercial.com.au/sold-leased1. Determine the Net Annual Income of your property. Find the appropriate CAP rate for your property. Valuation = Net Annual Income / CAP rate. To get CAP rates you can use reports like these or phone up agents and ask:
http://www.propertyoz.com.au/library/March-2013-cap-rate-analysis-Commercial-Property-Insight-Knight-Frank.pdfHowever these reports mostly cover bigger cities and I think you will find it hard to find a rate for Ipswich.
Another way you can look at the CAP rate is to treat it as your return rate. So let’s say you want 12% return and assuming net annual income is $50,000 then you wouldn’t want to pay more than 50000/0.12 = 416000. However using this approach you are not valuing the property.
Unfortunately commercial properties are harder to value then residential and you could be completely off if you make the wrong assumption for your CAP rate or don’t compare similar commercial properties to yours.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHi Tranquilles
To be able to give a ball park valuation can you provide a few more details?:
1) I assume the 800m2 refers to the land size rather than lettable area, if so, what is the lettable area?
2) How long until lease expiry?
3) Does the property have an industrial or commercial use?Understanding the above I’ll be able to refer to some other recent valuation reports to give you some benchmarks to use to get a better feel for the property’s value.
Cheers
RhysRhys Adams
http://www.redcommercial.com.au/
Email Me | Phone MeCommercial Property and Construction Finance Specialist
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