Commercial Property Valuation Calculator
Commercial property valuation for investment and lending. Calculate accurate values using professional appraisal methods.
How the Commercial Property Valuation Calculator works
Enter property details, income, expenses, and market data. Calculate valuation using cap rate, DCF, sales comparison, and cost approaches with detailed analysis.
Commercial property investment requires accurate valuation. This calculator provides institutional-quality analysis for confident investment decisions.
How it works
Tutorial
Commercial property investment demands accurate valuation using income approach, comparable sales, and replacement cost methods. Professional-grade analysis supports confident investment decisions, financing negotiations, and portfolio management for commercial real estate.
You have two options: use the calculator above for institutional-quality analysis, or follow this guide to manually value commercial properties.
The Formula
| Approach | Primary Formula |
|---|---|
| Income Capitalization | Value = NOI ÷ Cap Rate |
| Sales Comparison | Value = Comparable Sales ÷ Size × Subject Size |
| Cost Approach | Value = Land Value + (Building Cost – Depreciation) |
Step-by-Step Calculation
Here’s a multi-approach commercial valuation.
Step 1: Income Approach Valuation
Calculate value using income capitalization:
| Component | Amount |
|---|---|
| Gross Potential Income | $450,000 |
| Vacancy & Credit Loss (6%) | -$27,000 |
| Effective Gross Income | $423,000 |
| Operating Expenses | -$148,000 |
| Net Operating Income | $275,000 |
| Market Cap Rate | 6.5% |
| Indicated Value | $4,230,769 |
Calculation: $275,000 ÷ 0.065 = $4,230,769
Step 2: Sales Comparison Approach
Compare to recent market sales:
| Metric | Comp 1 | Comp 2 | Comp 3 | Average |
|---|---|---|---|---|
| Sale Price | $4.5M | $4.2M | $4.6M | – |
| Square Footage | 22,000 | 20,000 | 23,000 | – |
| Price per SF | $205 | $210 | $200 | $205 |
| Subject Property: 21,000 SF × $205 | $4,305,000 | |||
Calculation: 21,000 SF × $205/SF = $4,305,000
Step 3: Reconcile Value Indications
Weight different approaches for final value:
| Approach | Indicated Value | Weight | Weighted Value |
|---|---|---|---|
| Income | $4,230,769 | 60% | $2,538,461 |
| Sales Comparison | $4,305,000 | 40% | $1,722,000 |
| Final Reconciled Value | $4,260,000 | ||
Final Answer: Commercial property value is $4,260,000
What This Means
Both approaches indicate similar values around $4.2-4.3M, providing confidence in the valuation. For commercial properties, income approach typically receives heavier weighting since investors primarily buy based on income generation potential.
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