by Prince Licaylicay | Mar 24, 2024 | All Articles, Selling
Deciding when to sell your commercial real estate (CRE) property involves many factors. It shouldn’t be an impulsive or overnight decision unless absolutely necessary. Making a profitable decision requires time, research, discussion, and reflection.
Assessing the Right Time to Sell
There are methods to determine the optimal time to sell your property. This article will explore how to identify the best time to sell your CRE property and increase your chances of a successful sale.
Property Income vs. Sales Price
Two key values influence your decision to sell: the projected income your property can generate and its sales price. To make your property attractive to buyers, the projected income should exceed the sales price.
For example, if a property is projected to earn $6,000,000 in income but is listed for $5,000,000, it offers buyers an immediate $1,000,000 advantage. Conversely, if the income is $5,000,000 but the sale price is $6,000,000, it’s better to hold onto the property until the numbers improve.
Preparing Financial Projections
To assess your property’s viability, prepare a pro forma with the following:
- Financial projections of income
- Operating expenses
- Net Operating Income (NOI)
- Cash flow
- Capitalization Rate (Cap Rate)
- Internal Rate of Return (IRR)
- Equity Multiple
- Cash on Cash Return
Market Conditions and Potential Returns
As a CRE owner, studying your current market is crucial. Analyze the demographics of your competitors and potential buyers. Consider vacancy and interest rates in your area. Market trends can fluctuate, so trust the data when deciding to sell.
With this information, calculate two important values:
- Potential return upon selling
- Projected income if you keep the property
Compare these values with current market trends to determine if selling now is more profitable or if holding the property will yield better returns.
Operating Costs vs. Annual Return
Calculate your total annual operating costs against your annual property income. If the property fails to meet the required return percentage, consider selling before its value drops further.
For instance, if a property needs a 20% annual return to sustain operations but only generates a 10% return, selling is a better option. However, if you expect rent increases and steady leasing, holding the property might lead to greater long-term profits.
Competitive Prospective Buyers
Different buyers have varying needs and motivations. Larger companies with broader coverage areas might pay more for your property compared to local business owners. Understanding your potential buyers can create competition, allowing you to leverage a higher sales price.
Knowing your buyers helps you position your marketing effectively and identify the right audience willing to pay premium prices.
The Importance of Market Research
Finding the perfect time to sell your CRE property relies heavily on market research. Understanding current market trends enables you to make data-driven decisions. Analyze your competitors and potential buyers to better position your property in the market.
Tracking and trusting the numbers is essential for maximizing profit and securing better deals. Remember, market conditions are always changing, so continuous monitoring is necessary.
Hiring a Commercial Real Estate Broker
You don’t have to navigate the selling process alone. Hiring a commercial real estate broker provides access to expert opinions and helps secure better deals. Brokers have the knowledge and resources to assist you in making informed decisions and achieving successful sales.
Conclusion
Determining the right time to sell your commercial real estate property involves careful analysis and strategic planning. Conduct thorough market research, evaluate financial projections, and understand your potential buyers. By following these steps and leveraging professional expertise, you can make profitable decisions and optimize your CRE investments.
Even after outlining all the information above, determining when to sell your commercial real estate (CRE) can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com Let us help you stay ahead in the market!
by Prince Licaylicay | Mar 14, 2024 | All Articles, Selling
If you have a commercial property and want to put it up for sale, determining its value is crucial. Given that most commercial real estate (CRE) projects involve significant investments, careful consideration is necessary to make informed decisions. The first and most important step is valuing your commercial property accurately. Valuation for commercial real estate differs from residential properties due to added complexities and heightened values, making the process more challenging.
Approaches to Valuing Commercial Real Estate
There is a correct way to value your commercial property to get the best deal possible. The goal is to find the most advantageous approach for you. Understanding the different methods of valuing commercial properties is essential, and this article will help you gain an edge.
The Sales Comparison Approach
The Sales Comparison Approach, also known as the “market approach,” involves analyzing recent sales data, or “comps.” This method is commonly used in residential property valuation but can also apply to commercial real estate. However, finding comparable data for commercial properties is often more challenging. You may need to look beyond your market area for like-kind comparables, including demographics, access to infrastructure, leasing trends, and other relevant information.
Fortunately, property intelligence or AI-powered data platforms are available specifically for the commercial real estate industry. These tools allow appraisers and investors to quickly access opportunities in any market and uncover strategic insights, ultimately helping you value your commercial property effectively.
The Cost Approach
The Cost Approach is based on the assumption that informed buyers are unlikely to spend more on a property than it would cost to acquire land and build the same property from scratch. This method calculates the cost to rebuild the property, considering the current land value, construction materials, labor, and other factors. The property value is derived using a simple formula: Property Value = Land Value + Cost to Build New – Depreciation.
While this approach is not commonly used, it can be useful when your commercial property is in a less active market where data for other methods is difficult to collect.
The Income Approach
The Income Approach is one of the most popular methods for valuing commercial property. It focuses on the income the property is expected to generate in the future. To use this approach, you need to understand Net Operating Income (NOI) and Capitalization Rate (Cap Rate).
NOI is the net income generated by a property minus operating expenses, excluding capital expenditures, debt service, and taxes. The Cap Rate represents the ratio of NOI to the property’s value and indicates the anticipated return on investment (ROI) for the property owner.
To find the value of your commercial property using this method, use the formula: Property Value = NOI / Cap Rate. While this approach is popular, it is only accurate if you carefully consider all inputs. Miscalculating rents or underestimating vacancy rates can lead to inaccurate results.
The Gross Rent Multiplier Approach
If you prefer a simpler method, However Gross Rent Multiplier (GRM) approach might be suitable. This approach provides a quick estimate of your property’s value. The formula used is: Property Value = Annual Gross Rents x Gross Rent Multiplier.
Unlike the Income Approach, which uses net income, the GRM method relies on gross income to calculate property value. This approach can be helpful when you need a rough estimate quickly.
Making Your Choice
In summary, valuing your commercial property is driven by the information you gather. The more data you collect, the more accurate your valuation will be. Expert appraisers often use multiple approaches and average the results to determine the most accurate property value. While the process may seem challenging initially, it becomes easier as you gain experience.
Even after outlining all the information above, valuing your commercial property for sale can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your CRE investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com Let us help you stay ahead in the market!
by Prince Licaylicay | Mar 13, 2024 | All Articles, Selling
Phoenix, Ariz (February 28, 2024) —
Source From: https://realestatedaily-news.com/
Commercial Properties, Inc./CORFAC International (CPI)
Commercial Properties, Inc./CORFAC International (CPI), Arizona’s largest locally-owned commercial real estate brokerage, successfully completed the sale of Building F in Venture Court Professional Plaza, Anthem, Arizona. This two-story office building, covering ±27,223 SF, is located at 41810 N Venture Drive.
Its excellent position off I-17 and Anthem Way provides high visibility from the freeway. Additionally, being just six miles from the new TSMC semiconductor manufacturing plant in Phoenix, the building is strategically placed in a rapidly developing business hub.
Key Transaction Details
Eric Butler and Phill Tomlinson of CPI represented Liftable Media, Inc., the seller of the property. Meanwhile, Keith Lammersen from JLL represented the buyer, Maricopa County Libraries. The transaction, valued at $9 million, equated to $330.60 per square foot.
This successful sale benefits the buyer as they plan to transform the property into a new home for Maricopa County Libraries, which will serve the local community.
Resolving Legal Challenges
North Valley Regional Library was previously located on the Boulder Creek High School campus, where it shared space with students and the public. However, moving to Building F required amendments to the development’s Covenants, Conditions, and Restrictions (CC&Rs). Eric Butler and the CPI team stepped in to assist Maricopa County Libraries with this legal process.
Butler said, “We helped the library navigate the necessary changes to the CC&Rs, ensuring the move could proceed. It was a smooth process, and both parties were happy with the results.” By staying actively involved throughout the sale, CPI successfully addressed all legal obstacles.
CPI’s Commitment to Excellence
CPI’s involvement in this transaction reflects their dedication to providing exceptional service to their clients. Their ability to handle legal complexities and facilitate a smooth transaction demonstrates their commitment to achieving client satisfaction. Moreover, this sale contributes to the continued growth of Anthem’s business community, further enhancing the area’s development.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com Let us help you stay ahead in the market!
