Determining Property's True Value: Square Foot Price and Front Foot Price
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Determining Property's True Value: Square Foot Price and Front Foot Price

Another way to determine price when buying multi-unit residential, office, and industrial buildings is to check out the square foot price. Sometimes when evaluating commercial property, particularly when it is located in a mall or on a heavily trafficked street, the price will most easily be determined by the front foot.
                              determine the property's true price

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What is the square foot price?

Yet another way to determine price when buying multi-unit residential, office, and industrial buildings is to check out the square foot price. For example, if the property in the area is selling for $200 a square foot and your building has 10,000 square feet, the price might be $2,000,000. As with the GIM, you should check with agents and other investors for what the current square foot price happens to be for this type of property in your area. Yet another measurement is the rental rate as determined by square footage. This is especially helpful in terms of office buildings. For example, one building might produce monthly rental income of $5 a square foot while another might produce income of $15 a square foot. It does not take a genius to see that the second building should be worth three times as such as the first, on a square footage basis.

What is the front foot price?

Sometimes when evaluating commercial property, particularly when it is located in a mall or on a heavily trafficked street, the price will most easily be determined by the front foot. This refers to the number of linear feet that the property has on the street (or mall walkway). It only stands to reason, since the ability of the property to generate income for the tenant may be determined, to a large degree, by the number of people who either walk or drive by. The more front footage, the more valued the property. For example, if the property has 100 front feet and the value per front foot is $15,000, the property may be worth $1,500,000. Note: The cost per front foot varies enormously, depending on the location. On a side street it could be a quarter of the cost of being on a main street. In addition, many businesses no longer rely on frontage to appeal to customers. Rather, signage, online advertising, even word of mouth can make an apparently poor location quite valuable. Further, front foot price is usually derived from rent. The property, for example, rents out for so much a front foot. When this is the case, annualizing the rents and then using a GIM can often work more effectively. To find the front foot value of a property, you should check with agents and other investors who deal in that type of property.

 

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