According to the Montgomery Government, Alabama's beautiful capital was WalletHub's most affordable city for homebuyers in 2023. It has also ranked as one of the best cities for Black entrepreneurs and Black-owned businesses.
With all those recognitions, Montgomery's population will likely continue growing. So, if you're looking for an excellent place for commercial property investments, look no further than the "Birthplace of the Civil Rights Movement."
However, you must first learn about commercial property valuation methods.
To help you get started, check out the valuation strategies in this guide created by PMI River Region's real estate and property management experts.
Sales Comparison or Market Approach
Sales comparison is a real estate valuation technique that involves researching the value of recently sold comparable properties or comps. Comps are commercial real estate properties similar to the one you own (or are about to invest in) in terms of:
- Location, such as being on the same street or within the same immediate vicinity
- Size in square footage
- Primary building characteristics (e.g., same number of units for an apartment complex)
- Building amenities (e.g., an indoor gym, a pool, or outdoor spaces)
- Age and overall condition
You can also use this approach to determine potential rental rates before investing in commercial properties. Look for existing comps, discover how much they charge for rent, and then use your findings to establish your rental prices.
Cost Approach
The cost approach is a property valuation method that separates the value of the land from the cost of the building itself. Investors often use this type of property market analysis if comps are scarce or the building has had significant value-adding improvements.
With the cost approach, you must consider how much it would cost to build from the ground up. You then have to decide between the reproduction method and the replacement method.
The reproduction method involves calculating the cost of building a replica of the existing structure. With the replacement method, you'll calculate the cost of building a new structure with:
- A different design
- Different construction methods
- New (and better) materials
Once you have a cost estimate, add it to the value of the land. You can then determine which is less expensive: building a new structure from the ground up vs. buying a piece of land with an existing building.
Also, don't forget to account for appreciation and depreciation. As Investopedia notes, land appreciates while buildings depreciate.
PMI River Region's Professional Commercial Property Valuation
If you don't have time to conduct accurate and thorough property valuations, PMI River Region is happy to help. We offer complimentary commercial investment property valuations in Montgomery, AL. Through our expertise, property appraisal techniques, and state-of-the-art technology, we can help you accurately determine how much you can rent and profit from your commercial property.
We're also a full-service real estate management company. From valuations to marketing, tenant placement, and lease enforcement, we can do all these and more for you.
Partner With PMI River Region
At PMI River Region, our goal is to help investors make wise investment decisions. As such, we offer complimentary commercial property valuation services.
So, if you own a property in Montgomery, AL, or plan to invest in one, contact us today! Our free property analysis can help determine how much you can profit from your rental.
