Knowing the fair market value on a potential commercial real estate property can help you avoid paying more than what the property is worth in your investment.
There are many reasons to schedule a commercial appraisal any time you’re looking to purchase a commercial real estate property. Perhaps one of the most important reasons to have an appraisal done, however, is to establish the current fair market value of the property itself. This will help you ensure that you’re not paying more than the property is worth, which will also make it easier for you to obtain financing. When you hire an Arkansas real estate consulting firm to conduct a commercial appraisal, there are a few important factors that are taken into consideration when determining fair market value.
Building Size and Condition
Much like with a residential home appraisal, the size and condition of the property must be taken into consideration. This includes not just square footage, but the condition of important building components, such as the roof and structure. The plumbing, heating, and cooling systems will also be evaluated and factored into the fair market value.
Market Area
In addition to the size and condition of the commercial building itself, the market area of the property is another key factor in determining fair market value. Specifically, market area refers to the quality of the property’s location. For example, properties close to public transportation and other means of traffic will generally have a higher market value than properties located far away from potential customers or clients.
Potential for Rental Income
Another vital consideration in fair market value is the potential the property has to generate rental income. Because of this, properties with lots of different spaces for rental potential will be valued higher than those without usable rental spaces. This is because the more tenants a property is capable of holding at once, the more you’ll likely be able to generate in monthly rental income.
Availability of Similar Properties
Finally, when determining a commercial property’s fair market value, an appraiser will also take into consideration what other commercial properties are available in the area with similar potential for rental income, market area, and size/condition findings. If there are a lot of similar properties available, this will have a negative impact on the property’s fair market value. On the other hand, if there is very limited inventory in the area, this will cause fair market value to increase due to the basic concept of supply and demand.
These are four of the most important factors that an Arkansas real estate consulting professional will take into account when looking at a commercial real estate property. If you’re in need of a real estate appraisal and are looking for a team of professionals you can trust, reach out to Ferstl Valuation Services by calling (501) 313-0641 to request an appointment.
