Most important aspect of a commerical property

[collateralappr]

OK, I do understand what everyone is saying regarding the income, but a properties location is going to help or hurt the income of said property.

Does anyone have something from a reliable source (no offense to anyone) stating that income is the main factor in a commercial property.

 

[Abester]

Yes, the market.

 

[Scott Lanz]

I am not sure what "source" you are looking for. Would you be stating: "So and So said this is the most important aspect, therefore, it is?" I would think polling players in the marketplace would be your best source, appraisers, Brokers, owners, investors, etc. Some of this you already completed.

Further, I don't see how location can "help" or "hurt" the income stream. I can see management "helping" or "hurting" a stream. You generally cannot move a location

Now, changes in the surrounding market could have an positive or negative impact on the income for a location.

Scott J. Lanz

 

[Kevin Kent]

Coming from a finance, accounting AND real estate background, I can say with a straight face that income (as well as the ability to maintain that income) is the most important thing driving COMMERCIAL/INVESTMENT value. Now, that is not necessarily true for residential properties.

There is no "source" for this information. It's like asking for the "source" that states July 4 is Independence Day in the United States. Or it's like asking the "source" for 2+2 = 4.

 

[DTB]

.

Further, I don't see how location can "help" or "hurt" the income stream. I can see management "helping" or "hurting" a stream. You generally cannot move a location



Scott J. Lanz

Is that really what you meant to say?

 

[Scott Lanz]

Mike

Yes

Scott J. Lanz

 

[hastalavista]

Does anyone have something from a reliable source (no offense to anyone) stating that income is the main factor in a commercial property.

From The Dictionary of Real Estate Appraisal (4th ed.), Appraisal Institute:

Commercial Property- Income-producing property such as office buildings, retail buildings, hotels, banks, restaurants, service outlets, and owner-occupied properties that are capable of becoming income-producing should the owner so decide; usually zoned for business purposes.

From The Appraisal of Real Estate (12th Ed.), Appraisal Institute, Chap. 20:
"Income-producing real estate is typically purchased as an investment, and from an investor's point of view earning power is the critical element affecting property value" (p. 471).
(my bold for emphasis)

If commercial properties are defined as being income-producing properties, and such properties are purchased as an investment, then the earning power is the critical element affecting property value.
"Earning power" is best analyzed in the income-approach. :new_smile-l:

 

[PropertyEconomics]

From The Dictionary of Real Estate Appraisal (4th ed.), Appraisal Institute:

Commercial Property- Income-producing property such as office buildings, retail buildings, hotels, banks, restaurants, service outlets, and owner-occupied properties that are capable of becoming income-producing should the owner so decide; usually zoned for business purposes.

From The Appraisal of Real Estate (12th Ed.), Appraisal Institute, Chap. 20:
"Income-producing real estate is typically purchased as an investment, and from an investor's point of view earning power is the critical element affecting property value" (p. 471).
(my bold for emphasis)

If commercial properties are defined as being income-producing properties, and such properties are purchased as an investment, then the earning power is the critical element affecting property value.
"Earning power" is best analyzed in the income-approach. :new_smile-l:

Denis .. your post brings up an interesting question. Can commercial properties not be owner occupied and thus producing no income???

 

[hastalavista]

Denis .. your post brings up an interesting question. Can commercial properties not be owner occupied and thus producing no income???

I would say that a commercial property could be non-owner occupied (have a tenant that pays no rent or be vacant) and thus produce no income.

However, the property would still be valued based on its income-producing characteristic- and income can be produced on a regular basis (monthly rent) or at a single point in time (reversion).

How's that? :new_smile-l:

 

[PropertyEconomics]

I would say that a commercial property could be non-owner occupied (have a tenant that pays no rent or be vacant) and thus produce no income.

However, the property would still be valued based on its income-producing characteristic- and income can be produced on a regular basis (monthly rent) or at a single point in time (reversion).

How's that? :new_smile-l:

The question is IF a property were OWNER OCCUPIED ... could it still not be a commercial property even though it has no income either from an historical perspective or for a forecasted future?

Are ALL commercial properties income producing???