Commercial Property Valuation Calculator
Value commercial properties using professional income-based methods. Analyze office, retail, and industrial real estate investments.
How the Commercial Property Valuation Calculator works
Enter property income, expenses, vacancy rates, and market data. Calculate property value using cap rate method, compare to market sales, and analyze investment returns.
Making smart commercial real estate investments requires accurate property valuation. Calculate values like professional appraisers and investors do.
How it works
Tutorial
Commercial property investors value buildings based on rental income and market cap rates. Learning professional valuation methods helps you evaluate deals, negotiate prices, and understand if a property is priced fairly for its income potential.
You have two options: use the calculator above for complete property analysis, or follow this guide to learn commercial valuation methods.
Commercial Property Valuation Methods
| Method | How It Works |
|---|---|
| Income Capitalization | Value = NOI ÷ Cap Rate |
| Sales Comparison | Value based on price per square foot of similar sales |
| Cost Approach | Land value + building replacement cost – depreciation |
Complete Valuation Example
Here’s how to value commercial property using multiple methods.
Method 1: Income Capitalization
Calculate value from the property’s income:
| Component | Amount |
|---|---|
| Gross Potential Rent | $450,000 |
| Minus: Vacancy Loss (6%) | -$27,000 |
| Effective Gross Income | $423,000 |
| Minus: Operating Expenses | -$148,000 |
| Net Operating Income | $275,000 |
| Market Cap Rate | 6.5% |
| Value (Income Method) | $4,230,769 |
Calculation:$275,000 ÷ 0.065 =$4,230,769
Method 2: Sales Comparison
Compare to recent property sales:
| Detail | Comp 1 | Comp 2 | Comp 3 | Average |
|---|---|---|---|---|
| Sale Price | $4.5M | $4.2M | $4.6M | – |
| Building Size | 22,000 SF | 20,000 SF | 23,000 SF | – |
| Price per SF | $205 | $210 | $200 | $205 |
| Your Property: 21,000 SF × $205 | $4,305,000 | |||
Calculation:21,000 square feet × $205/SF =$4,305,000
Method 3: Reconcile Both Methods
Combine both approaches for final value:
| Method | Indicated Value | Weight | Weighted Value |
|---|---|---|---|
| Income Capitalization | $4,230,769 | 60% | $2,538,461 |
| Sales Comparison | $4,305,000 | 40% | $1,722,000 |
| Final Property Value | $4,260,000 | ||
Final Answer:Property is worth approximately$4,260,000
Why Use Multiple Methods
Both methods give similar values around $4.2-4.3 million, which increases confidence in the valuation. Income method gets more weight (60%) because commercial buyers focus on cash flow. If the methods gave very different values, you’d need to investigate why and determine which is more accurate for this specific property.
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