A simple formula determines the value of the commercial property that is up for sale. It is based on the net operating income the property generates each year. When you are considering a commercial property to sell, the broker should provide a profit and loss statement. Brokers who list commercial properties for sale might refer to the profit and loss statement, or income property operational datasheet, as an IPOD.
The IPod can be compared to other sources to determine the true numbers. When looking at the commercial estate for sales in Melbourne, the problem is that brokers and/or owners will often exaggerate the income generated by the property while trying to reduce operating expenses. The net operating income generated each year by any commercial real property determines the value.
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Each dollar of additional income per year increases the property's value by approximately ten dollars depending on the location and age of the property. This extra income can be generated by generating additional rents or by reducing expenses through better management of the property.
Understanding that commercial real estate owners will often present unrealistic figures in order to increase the price of their property, you'll be able to understand why it is important to research the market before you look at commercial properties for sale.
It's easier for the owner or broker of commercial property to try to trick you into thinking they know the average rental rate in the area or the expense ratios for an apartment building that is twenty-five years old. To verify the income of a commercial property that is for sale, the first step is to request the rent roll.