Aftertax Cash Flow From The Sale Of This Asset Key Factors For Evaluating Commercial Property For Sale

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Key Factors For Evaluating Commercial Property For Sale

The secret to valuing commercial property lies in a model where one property can be valued independently of another property.

The basis of any model is to ensure that proper calculations are made regarding the durability of any property for sale in the market. This needs to be calculated. If the calculations don’t work, you shouldn’t invest.

Our model has the following properties:

Summary

The summary provides for the size of the property expressed in Gross Lettable Area (GLA). It also provides for rent receivable for renting out commercial property. This is important because it will indicate whether you can compete with other similar properties in the same area. It provides for the net rental income derived from the property as it determines the value of the property.

come on

Variables include average interest rates over the past 20 years. It should also include the average inflation rate of the last 10 years which should be factored into the calculation. An annual rent increase is required that can be effected for a period of at least 10 years into the future. Provision for vacancy rate is important when compiling your model. All expenses are captured in this section,

assessment

Evaluation is the culmination of all previous parts in one view of the model. This will include the NAV (Net Asset Value) determined on an annual basis. This will also include the gross rental income associated with the property including all accretions. All costs are reflected here along with monthly loan payments based on average interest rates over the last 20 years. Calculating gross rental income minus all related expenses will result in pre-tax cash flow on a monthly basis. From here all tax liabilities can be calculated resulting in tax cash flow calculations. Determining your ROI (Return on Investment) is a direct result of this calculation. The IRR (Internal Rate of Return) is derived from this calculation which makes it an important tool for comparing different properties.

Combining all the attributes of a model dedicated to valuing commercial properties for sale will ensure you make the right decisions time after time. Most commercial properties for sale are offered as commercial properties for rent. So it is important to ensure that the right investment decision is taken based on pure calculations.

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