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Tips on Commercial Sales
 

1. You have to know the relations among Value, Net Operating Income and Rate of Return (the Income Approach): Value of Property = Net Operating Income ÷ Rate of Return

 

2. Using the formula, you can tell if the seller's asking price is reasonable or not by first finding out the market rate of return (see Tips on Appraising Real Properties).  If you are acting on behalf of the seller, you can tell whether the property is marketable and then decide to accept the listing or not.

 

3. Even if the property is vacant, you can use potential income (projecting the rent) to present the rate of return when you are the selling agent.

 

4. Investors may come from overseas, or across the border.  In fact, there are many investors from the US to buy properties in Canada.  Beside commercial properties, recreational properties and millions dollar homes are also welcome by the Americans. You may consider targeting the US for buyers.

 

5. Be careful when you deal with properties with residential units, many jurisdictions may have specific legislation to control residential rent so that the income generated may not be legal.  New owner may have to reduce the rent and pay back the overcharged rent to the tenants in the future.

 

6. For properties with gross lease, the risk is at the owner's side as the landlord has to absorb the increases in realty tax, maintenance fee, insurance and etc.  This will lower down the net profit of the property.

 

We will keep on updating this page, please come back later.  Please go to Commercial Sales page for more contents.

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