Commercial real estate is one of the best investments you can make, but timing is everything, and every decision you make should be backed up by plenty of research and analysis. An investment analysis enables you to “look before you leap” and ensure you have the information you need to make a truly informed decision.
Ferstl Valuation Services has been offering real estate appraisals in Arkansas since 1967, and we strongly recommend an investment analysis any time you’re considering updating your portfolio of real estate properties. A professional investment analysis is used to determine whether a specific property meets a particular investor’s risk and return requirements, and it reflects the relationship between acquisition price and anticipated future benefits of a real estate investment. Here are a few of the reasons why an investment analysis is a “must” before investing in commercial real estate:
Risk Assesment-Commercial real estate offers a lot of upside for savvy investors, but it also offers a lot of risk. Once you’ve chosen a specific location for an investment property, you have to consider more than its resale value and potential for cash income. You also have to consider factors such as seasonal demand for office space, the local job market, and interest rates to evaluate whether or not you should proceed with the investment.
Accurate Property Valuations-There are numerous numbers to consider when calculating the value of a commercial property, including the monthly mortgage payments and the gross amount of monthly rental income from tenants. But the most important numbers to consider are monthly cash flow and the property’s capitalization rate, which give you a snapshot of how much you stand to gain from your investment. You can estimate the property’s capitalization rate by subtracting operating expenses from the property’s annual rental income and dividing that number by the total property cost.
Future Value-Many investors purchase property on a speculative basis, and an investment analysis helps you determine the property’s future resale value and its potential for appreciation. You’ll be able to determine whether you’d like to go forward with the property investment to your portfolio or seek more return-on-investment positive alternatives.
For more information about real estate appraisal services in Little Rock, contact us online or at 501-313-0641.
