Commercial property is one of the best investments that anyone could probably make. But the main problem here is how to determine whether the rates demanded by the sellers are worth it or not. Because while buying a residential building you only have to consider the condition of the property and whether all the plumbing, electric, and heating lines are working properly or not. But in the case of commercial property, you have to consider many other things as well.
Factors that determine the cost of a commercial building
Here we will discuss a few factors that will help you decide whether the money you are paying for a commercial building is worth it or not.
- Location
Location is a very important factor to look for while buying a commercial building because it will decide how much revenue and potential customers you can expect. If the commercial building is in an area that is already established and has other proximities like malls, cafes, etc., then you can expect more people in your building and it will cost you more.
- Income Potential
The potential for income is another factor that determines the cost of a commercial building. For example, if you are getting a building with more space where you can make a huge office that has a workspace for more liabilities then your income potential will also be high.
- Cost Approach
Another thing that helps you to estimate the total value of the building that you are buying is its cost approach. You can estimate the value of land and the cost of construction on it. If the demand is near that amount then you should go for it.
- Sales Comparison Approach
The sales comparison approach also helps you to decide whether the cost is or not. If there are a lot of similar buildings around you then your sales will be divided and you should not invest a lot in such structures. But sometimes, the sales comparison approach can be a drawback for your decision because what if you are offering similar things but in a better and unique way? You can go for healthy competition and increase your sales through your uniqueness and quality.
- Age and Condition
Age and condition are not only important while buying a residential building but you should also check on these factors while buying a commercial building. If the building is new and the condition is good then there are chances that you don’t need any repairs or will not face any damage for a long time. Otherwise, the repair cost will increase your budget.
What is the Average cost of commercial property in CA?
The commercial properties in CA are divided into three classes such as Class A, Class B, and Class C depending upon many factors like location, exposure and income potential, etc. The cost of these commercial buildings varies depending upon which class they belong to.
- Class A workspace will cost you around $55.83 per square feet.
- Class B workspace will cost you around $37.04 per square feet.
- Class C workspace will cost you around $33.83 per square feet.
What type of commercial property is most profitable?
The properties whose tenants values are high are considered to be the most profitable commercial properties. Some examples of such buildings include office space, multifamily projects, mixed-use buildings, student housing, and self-storage facilities.
FAQs
Yes, you can surely do that because if the building is zoned for residential use then there is no issue in using it for residential purposes.
Yes, property taxes are cheap in California compared to the national average because the national rate is 0.99% while that in California is 71%.