The value of a commercial property for sale is determined by using some simple formulas that are based upon the amount of net operating income that the property produces each year. So when you are looking at a commercial property for sale, one of the first things that you'll want to ask the broker for is the profit and loss statement.
Some brokers who have listed commercial properties for sale in el Gouna, may refer to this profit and loss statement or income property operating data sheet. Once you get the or profit and loss statement, you can then compare the information provided by the broker or seller to your other sources to help determine what the real numbers are.
The challenge when looking at any commercial property for sale is that the broker and/or owner will often tend to exaggerate the amount of income that the commercial property for sale produces while also trying to minimize the amount of operating expenses that are reported.
The reason for this is simple. The value of any commercial real estate is based on the amount of net operating income the property creates each year. In fact, each additional dollar of annual income increases the value of the property by roughly ten dollars, depending on where the property is located, and how old it is. Note that this extra net income can come from either getting additional revenue in rents, or from reducing expenses by managing the property more efficiently.
Once you understand that owners of commercial real estate will tend to present unrealistic numbers in an attempt to get a higher price for their property you'll understand better why it's necessary when looking at any commercial property for sale to get to know the market you are investing in.
When you know what the rental rates in an area tend to be or what the typical expense ratios are for a twenty-five year old apartment building then it's much harder for the broker or owner of a commercial property for sale to attempt to pull the wool over your eyes.
The first step in verifying the income of a commercial property for sale is to ask for the rent roll. The rent roll is a list of what each apartment, self storage unit, mobile home lot, or office space rents for.
Make sure that you get the actual rent roll because the owner or broker of a commercial property for sale may try to give you a Pro-forma rent roll instead of the actual rent roll. Pro-forma means that there is an expectation, realistic or not, of getting higher rents than the property is currently getting.
My response to this has always been when looking at the expenses from a commercial flat in el gouna for sale at PPgouna remember that you're trying to come up with the actual amount that it will cost you to operate the property rather than what the seller's expenses have been. So while it's helpful to know exactly what the seller's costs have been, I've learned to rely on the information provided by the seller when looking at a commercial property for sale because this information is almost always inaccurate.
