In the commercial real estate industry, there are certain elements you should consider when deciding to sell a commercial property. These will help you decide to sell, hold, or buy property.
Things are looking good in the commercial property market for 2017. If you are weighing the decision of selling your property, knowing what today’s market looks like will help you make a wise and informed choice.
According to Forbes, commercial property valuation is up, and investors seem optimistic. When Forbes surveyed 201 executives in the commercial real estate industry in 2016, they found that 52 percent of respondents said that their segment of the market was strong or very strong. Whether your property is an office building, retail space, hotel, restaurant, multi-family unit apartment building, gas station, or land, there are certain factors that you should consider before selling a property.
4 Reasons to Consider Selling Your Commercial Property
1. A Major Tenant Renews: If a major tenant renews their lease in your property, it can increase confidence in the value of the property and make selling an attractive proposition. When a property has long-term tenants, buyers are more likely to see it as a stable investment.
2. Step-up in Basis Allows for Sale: When a property is passed on to a beneficiary after a death, it is usually worth more than when the original owner purchased it. The passing of a long-term owner of a property with low basis (or original value) enables the beneficiary to sell the property without paying taxes on the full value of the property. In a case like this, you essentially pay less in taxes because of the difference between original value and appreciated value on a property. This process is called a step up in basis.
3. Loan Coming Due: A loan on the property or another investment may become due and necessitate a quick sale. This kind of sale can help when you owe money on a property that you are unable to pay; essentially, you pass along the loan to a buyer and cash out any equity that you may have in the property.
4. You Foresee a Major Tenant Lease Expiration: It is tough to sell a property if a major tenant only has one year left of the lease, because a potential buyer often does not want to handle finding another tenant within a year of purchasing a commercial property. If you are made aware of plans for a tenant to leave, selling with 2 to 5 years left on a lease can usually garner a fair price.
Non-financial Considerations
There are nonmarket considerations to weigh when deciding to sell. Often, a property holds sentimental value, or you might simply feel uneasy about selling. Do you have long-term goals for the property that do not involve selling just yet? If so, it is smart to get a commercial property valuation so that you are aware of its current value and so that you can get recommendations about how to proceed if you ever decide to sell.
Commercial Real Estate Appraisals in Arkansas
Are you considering selling your commercial property? Ferstl Valuation Services wants to help you decide whether to buy, sell, or hold your commercial property. Find out more about how Ferstl Valuation Services can help you with your commercial real estate questions by requesting an appraisal from one of our experts or calling our offices in Little Rock at (501) 313-0641 or Northwest Arkansas at (479) 595.0245.
