Real estate is an incredibly lucrative industry, especially if you’re knowledgeable. It takes a little to adjust to the nuances of the commercial sector. However, the profit potential is even higher than it is in residential. Here are a few tips to help boost the value of your commercial property.

Learn How to Calculate Commercial Property Value

For each investor, a different calculation feels more appropriate. But, there are generally two ways to derive a commercial property’s value. We can look at how much income it’s producing and how much it can produce. Or, we can analyze the problem by focusing on expenses.

We’ve always preferred using income-based calculations whenever working in the commercial sector. Usually, you can use the figures from them while negotiating. Just show prospective buyers the rental income history. That should be enough to convince them the property is worth more.

Make Strategic Upgrades Throughout the Property

Everyone knows you have to pay to experience luxury. So, use that knowledge as a way to guide investment decisions. For example, a door threshold seal doesn’t cost much.

But, it still adds a ton of value to the property. They can limit noise from disturbing people in different rooms. Plus, they can even reduce drafts from leaking out of the building.

Think about ways to invest in the property without spending tons of money. If you can add something, it will improve the property’s value.

Minimize Operating Expenses by Increasing Efficiency

As we mentioned, one of the ways you can calculate a commercial unit’s value is by looking at expenses. By lowering them, you can increase the property’s value, too.

We’d recommend swapping out all the lightbulbs for LEDs. They’re a little expensive at first, even though they’re more efficient. You can also add new windows with higher thermal resistance ratings. Anything that lowers the operating expenses of a building will boost its value.

Increase the Rental Rates for Your Units

Boosting the unit’s cash flow is another approach. To increase cash flow, you can charge each of the tenants more. Or, you can make sure they aren’t any unoccupied unties. Pursuing both routes is the best way to move forward, typically.

Whenever you’re in a deal, the buyer will want to see the unit’s cash flow. The higher it is, the more they’ll be willing to pay. Set up an annual increase and index it to inflation. That way, you won’t have to request new lease agreements manually.

Switch to Another Utility Company

We’ve already spoken about increasing the building’s efficiency. We can take this further by looking for a better deal on electricity. By talking to several companies, it’s not hard to find one willing to make a better offer.

Even a 5% decrease can add up to a ton if the building costs over $1,000 a month. Sometimes, utility companies design special deals when working with commercial units. Ask them if they can offer you anything to reduce your monthly expenses. The lower you can get them, the more valuable the property.

Adjust Applicant Criteria to Control Occupancy Rates

Let lower-quality tenants get into a lease if there’s not a ton of people renting the building. If you have more than 10% vacancies, it’s time to be less picky.

This works in the other direction as well. Once vacancies are under 10%, start being strict with who you give leases to.

Controlling the applicant criteria can help you maximize occupancy and profits. You can attract more tenants to fill up empty units by lowering them. Then, you can raise them to attract higher-quality tenants later on.

Maximizing the Value of Your Commercial Property

There’s only one way to maximize the value of your property. You have to create the most significant difference between income and expenses. If the building makes a ton of profit, people will pay a ton to get their hands on it. Focus on lowering the expenses of the build as soon as you become the owner. At the same time, look into ways of attracting new tenants. Once most of the units are occupied, start raising the rents.

How to Improve the Value of Your Commercial Property by Elizabeth Howard