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Valuing properties with commercial leases involves various steps

| May 9, 2019 | Commercial Leases

According to experts, the market of non-residential properties is currently valued at $10 trillion. For this reason, investors who have been contemplating purchasing properties featuring commercial leases may be wise to jump into the real estate market this spring. Here is a look at a few ways in which investors in Los Angeles can figure out the values of the various commercial properties they are targeting.

The first common property valuation approach is called the cost approach. With this method, investors look at how much money they would need to rebuild properties. Factors considered in this approach are current land costs and construction material costs. This approach is ideal to use when locating a comparable real estate property is difficult.

Another approach involves the use of income capitalization. With this approach, investors look at how much money they will likely derive from specific properties. This approach involves comparing a property to other local properties that are similar. It also involves factoring in income decreases based on necessary expenses, such as maintenance costs.

Although purchasing properties featuring commercial leases can be a smart move this year, real estate investing is a risky business. For example, the wrong deal may cause an investor to lose money. For this reason, it is critical that an investor consult an attorney before embarking on a potentially lucrative transaction. An attorney in Los Angeles can help the investor to make wise decisions related to the deal and ensure that the investor’s legal rights are protected from start to finish.