Whether you plan to hold onto your real estate investment, sell it or lease it to tenants, you want to see a high return. Some aspects of commercial property value, such as value based on location, aren’t under your control, but there are a number of aspects you do have control over.
Explore three actions you should take to increase commercial property value, and get a better understanding of how these actions lead to success.
1. Don’t Make Decisions Based on Property Taxes
Building up the value of your commercial property portfolio increases your financial means. However, some property owners are concerned that if the marketability of the property is improved, through renovations or leasing activity, the jurisdiction will take note and increase its assessment of the property.
If you’ve been hit with an increase in your property tax assessment recently, you understand the impact – it’s a higher tax bill that you didn’t anticipate or budget for. But the law is on your side. Taxpayers have the legal right to appeal their property tax assessments and benefit from due process.
One of the best pieces of advice I’ve received came from an accountant I knew: “Don’t ever do anything because of taxes.” In this case: Don’t let the fear of increased property taxes deter you from increasing the value of your portfolio.
You cannot control or predict whether the taxing jurisdiction is going to increase your property tax assessment, but you do have control over your appeal. With the right property tax experts on your side, you have the power to challenge the jurisdiction and reduce your commercial property taxes.
Don’t be concerned with the impact of property taxes on your portfolio. Property tax value is different from market value or investment value, so building value should always be your goal. Invest in your portfolio strategically to increase its value, and let property tax experts handle your taxes.
2. Maintain Your Buildings
The condition of your buildings has a huge impact on your commercial property value. Maintain your buildings as if you were going to sell them tomorrow. Manage repairs, maintenance and capital improvements to strengthen your competitive edge in the market and attract the best tenants. For many tenants, the appearance and condition of your building is an extension of their brand, and they are willing to pay for that added value.
If you know your roof has a remaining life of five years, start setting aside funds now to pay for the replacement. If your parking lot is full of holes, don’t add patches to solve the problem: A new patch never binds to old pavement, so you are wasting money and delaying the inevitable replacement. Add repaving to your maintenance plan, so prospective tenants or buyers don’t discount the value of your property.
Ultimately, maintaining your building is common sense. Real estate will depreciate due to wear and tear, but it is up to you to maintain your building. This protects your investment and generates cash flow.
3. Invest In Your Property
“You have to spend money to make money.” You’ve probably heard that saying in the context of business before, but it has meaning for your commercial property portfolio, too. Investments beyond repairs, maintenance projects and capital expenditures could have a major impact on your commercial property value and translate into higher rents.
An efficient property is a more valuable property. If your utility bills are high, consult an energy expert about opportunities to reduce those expenses. They can advise you on different energy-efficient solutions and help you get competitive quotes. These upgrades lower your operating costs, increasing property value.
You benefit on the property tax front, as well. A number of tax breaks exist for energy efficient buildings. Certifications such as LEED (Leadership in Energy and Environmental Design) make your building more attractive to tenants and may support a higher lease rate. LEED, which is awarded by the United States Green Building Council (USGBC), is based on a building’s exceptional environmental performance. In many cases, this certification also supports the sustainability initiatives your tenants have adopted in their own businesses.
Apply these suggestions to your own property to increase its value and improve the return on your commercial property portfolio.
Learn more about increasing your commercial property value and mitigating the risk of property tax increases in a free consultation.