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Decide to Sell

Businessman looking at the city view.

Selling commercial real estate can be a lucrative opportunity for owners and investors when it’s done right. In this guide, you will find answers to essential commercial real estate questions and helpful tips that will give you the best results.

When is the best time to sell?

The most favorable time to sell your property is when it meets one or more of the following conditions:

  • It’s at its peak potential. Selling your property when it’s at its most profitable may seem counterintuitive. However, this is also the time when you can sell the property at top market rates. If you want to earn significant profits in a short amount of time, this is the perfect opportunity to put your property up for sale.
  • Its earning potential has diminished. When your property produces lower than expected profit margins, then it is time to move on.
  • It’s not as valuable as it once was. Market downturns, new developments within the neighborhood, or unexpected factors can erode the value of your property. When your property loses its original value, it is best to cut your losses and invest in something else.
  • It no longer meets your investment goals. Consider your investment portfolio and decide whether your current commercial property can help you achieve your financial goals.

How to price commercial real estate for sale?

Top commercial real estate agents will tell you that pricing your property correctly is essential if you want to successfully unload your asset. Unlike residential properties, the value of commercial real estate depends on variables like rent rates. However, to identify the intrinsic value of a piece of commercial property, look into the following approaches:

  • Income approach –This method looks at the potential income a rental property can accumulate relative to the initial investment. The potential income can be determined using the area’s capitalization rate.
  • Sales comparison approach— This approach is similar to determining the market price of residential properties, commonly used by most appraisers and real estate agents. It determines the value of commercial real estate by comparing a piece of property to another similar one in the area.
  • Cost approach – This is typically used to value vacant land. To get the estimated value through this method, appraisers will consider the intrinsic value of the land along with the depreciated value of any improvements made on the property. It’s important to note that the IRS has a broad concept of the term “improvements” when calculating the taxes on vacant land. Even if there are no buildings or structures on the property, the IRS considers anything “artificial” attached to the land as an improvement. This includes sewer systems, roads, fences, and even mobile homes, to name a few.
  • Gross rent multiplier approach – This method of valuation looks into the average profits from rent collected annually. It focuses on the gross rent rate instead of the capitalization rate. The total estimated value from this approach does not take into consideration taxes, utilities, and insurance.

Tips on Selling Your Commercial Property

  • Get the help of real estate advisors. Selling commercial real estate requires expertise, experience, and resources available to commercial property advisors.
  • Know your real estate goals. Having a set of goals will keep you focused on what to look for and save you time. Your investment goals will determine the plan of action when it comes to negotiations.
  • Gather documents. A commercial real estate sale comes with plenty of paperwork. To move the process along, make sure copies of the title deed, previous appraisals, tax returns, and other pertinent documents related to the property are on hand.
  • Pay attention to trends. Make it your business to stay on top of market and industry trends. Learn about current lending rules and the area’s zoning laws. Staying informed allows you to be prepared for anything.
  • Market your property correctly. With the right marketing strategy, your commercial property can sell more quickly and for the best value. Look at other California real estate listings and see how their marketing plans are panning out. Discuss marketing strategies with your real estate advisor and figure out the approach that best suits your needs.
  • Don’t rush. Selling commercial property requires more time and effort than your typical residential property. Rushing into decisions is never a wise move. Always consider the options available to you and don’t hesitate to consult experts in the field.

Achieve Your Commercial Real Estate Goals with R&Z Real Estate Advisors

With expertise, experience, and resources, we can help you get the best results. Contact us here or call us at 650.391.1758 (Tony) and 650.391.1781 (Ray) to learn more.

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