Your commercial property will require an appraisal over the course of your ownership. This appraisal may be for financing purposes, insurance purposes, or liability purposes. Regardless of the reason, you will need to know a few key points about your commercial real estate appraiser assessment and appraisal of your property. One of the important aspects is to understand what may affect your appraisal. Here are a few key items that may affect it and how.
Demographic and Location
One thing you may not consider is how the demographic you are trying to reach and your location will affect your appraisal. With commercial properties, part of the property value is based on the demographic and location. For example, if you own a yoga studio in the city, you will likely have a higher appraisal rate than if you owned a yoga studio in a more suburban or even rural area. In the city, you can access more customers that would be interested in your service whereas you may have a much lower turnaround on customers wanting your services in a rural area.
Saturation of Service
If you are located in the city, your appraiser will likely view the businesses like yours in the area. For example, if you offer steel fabrication services and are located in an industrial area with a half dozen other similar services, then you may not rank as high on the appraisal. This is due to how much you can bring in financially, what need people have for your service, and if there are already enough of that service in the area. If you are part of several dozen other services, the area may be saturated and you may not have as long of a lifespan in that area due to the competition.
Yearly Income Potential
With a commercial property, your appraiser will likely look at not only how much you can bring in each year financially, but also the potential for someone else as well. For example, you may decide to sell your property. The appraised value tells the next buyer what the potential for success and income is in that area. It also may tell them how long to expect to have that business and the income provided from it. For example, a prime location in the center of the city is going to bring in a higher appraisal value due to location and the income potential for whoever owns the business.
These are just a few of the key items that can affect your commercial property appraisal. If you are ready for your appraisal, contact your commercial real estate appraiser. They can schedule an appointment to assess and inspect the property. They can also discuss their findings with you to determine if changes can be made to increase the value of the appraisal or changes that need to happen for the betterment of the property.