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When businesses expand and relocate to a larger office, owners are often faced with the dilemma of choosing whether to sell their old space or to keep it as an investment. Before making a decision, it is important to weigh several factors to ensure the economic viability of selling or renting it out. Today's post will provide a brief overview of the factors to consider in the sale or rent out of a commercial space in Makati. With our help, deciding between the two options should be easier and more beneficial to your business.

1. Check the current value of the commercial space and weigh the risks.


If the current value of your space is higher than its original value:

If the current value of your space is lower than its original value:

Sell the property
You can liquidate your asset and set it aside for other projects or business investments (ie. expansion, purchase of new equipment, etc.) Selling as soon as possible also lowers the chances of selling your property at a less price, in case the real estate market is not doing well.

Sell the property
You can avoid the risk of selling at a lower price in the future and reduce costs since you would have one less commercial space to maintain. However, you might also miss out on the chance to sell at a higher price when the market starts to go up. In case of a down economy, it is likely that Makati spaces would be the first to increase in value.

Rent out the property
Renting out the property can help your business have a more positive cash flow, since you would be receiving rental payments regularly. However, the risk of not having consistent returns is also great in this option, especially ifyou are unable to lease out the space within a few months.

Rent out the property
This is the option if you want to risk waiting for the property value to come up. However, make sure you are ready to take on landlord responsibilities and risks.


2. Find out your investment yield.
Crunching the numbers is necessary to make sure that you choose the best option for your Makati commercial space. The first step is to use an accurate estimate (exact would be better) of the following:

  • Expected monthly rent
  • Annual taxes
  • Other annual costs
  • Monthly fees
  • Likely sales price
  • Estimated annual income

Using the following data, compute for the operating income. Afterwards, divide the operating income by the asset price (the price at which you bought the property). If this yield is lower than 5.7%, then it might be better to sell your commercial space. 

3. Consult a real estate professional regarding local market trends, average rental rates, and the time it would take to find a qualified tenant.
Accurate real estate research is very important to help you maximize your investment and reduce the risk of losing money. An experienced real estate broker can give you updates on current rental rates in Makati, as well as a comprehensive analysis on the costs of being a landlord versus the profit potential of the property. He or she can give you a good estimate on the net profit or loss based on the value of your commercial space.

Looking to sell or rent out your property? Contact KMC MAG Group to talk to a qualified real estate broker and find out the best course of action for your business.