For commercial property market value, is it annual gross income or annual net income x 2 = the market value?

selling a hotel with annual gross income of 1,500,000?
In Selling Property - Asked by Linda S. - Jun 22, 2011
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Answer(s)

Fida A.
Broker/Agent
Philadelphia, PA

ANI x 2 = Market Vaue

Jun 23, 2011
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James B.
Broker/Agent
Oakbrook Terrace, IL

For a quick estimate, hotels are often valued based upon multiples of gross income or on a per-key basis. Discounted cash flow models will provide a more accurate valuation picture.

Jun 24, 2011
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jonathan k.
Owner/Investor
LOS ANGELES, CA

it all depends on the current market CAP rate. If you are selling a hotel, it greatly depends on what flag you carry and what the associated fees are. like any other income producing property you want to
Gross Income - Operating Expnses = Net Operating Income (NOI).
Now take the NOI and divide ny the CAP rate in the area. To get the cap rate talk to a real estate agent or search loopnets comp tools. Example if your NOI is $100,000 and the going cap rate is 7%, then $100,000 / .07 = $1,428,000 (roughly).
good luck. I hope this helps.

Jun 26, 2011
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Michael G.
Developer
Mokena, IL

I agree that it should be annual NOI divided by the markets cap rate for an approx market value

Jun 30, 2011
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Jeremy C.
Broker/Agent
Andover, MA

For commercial property market value, there is no one measure that investors use. Take a look at the sales comparison approach, income valuation approach, and the replacement cost approach. In Massachusetts commercial real estate, many investors are buying below replacement cost while many others are using the income valuation approach where they either apply a cap rate or internal rate of return analysis to determine the commercial property market value.

Jul 10, 2011
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David N.
Broker/Agent
San Francisco, CA

In addition to using the Cap rate (as Jonathan K. details), you may want to take into account GRM, price per foot, and price per unit (or room in this case) to help guide the process. However, I think the Cap rate approach is probably the most accurate for this product type.

Jul 21, 2011
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