Reducing Operating Expenses on Business Premises Increases Market Value?
2016/12/01 By By UniqueCo
When valuing a business premises i.e. offices, industrial or retail, we generally use the rental income to determine the value of the property. The simple valuation methodology is Market Value = Net Annual Income ÷ Capitalisation Rate. Net annual rental equals the deduction of basic overheads such as rates and taxes, general municipal services, basic building maintenance and service contracts, short-term building insurance, management fees and provision for sundries.
You can save on overheads by reviewing your municipal value versus actual market value, in order to gain on lower rates and taxes. And keep the premises well-maintained avoiding expensive renovations at a later stage. And regularly updating your building replacement cost for insurance valuation purposes in line with active markets trends. Compare management fees with other competing agencies and make sure you have good reliable asset managers.
Always depend on figures and market trends supplied by independent expertise not physically involved with the property. When income producing properties are well-established, well-maintained and well-managed, risk are lower and potential capitalisation ratios more supportive equals’ better market values.