01Step 1: Gather Basic Information

  • To start calculating the cost per square foot, gather the necessary information about the property.
  • Obtain the total purchase price of the property, including any associated closing costs.
  • Determine the total square footage of the property. This information can be found in property records or floor plans.
  • Take note of any additional costs or expenses related to the property, such as renovations, repairs, or maintenance.
  • Collect data on any income generated by the property, such as rental income or lease agreements.

02Step 2: Calculate the Total Cost

  • To calculate the total cost, add up the purchase price and any additional costs associated with the property.
  • Add the purchase price to the closing costs to determine the initial investment.
  • Include any expenses incurred for renovations, repairs, or maintenance.
  • Subtract any income generated by the property to account for the net investment.

03Step 3: Determine the Square Footage

  • To determine the square footage, refer to property records or floor plans.
  • Measure the usable area of the property, excluding common areas or shared spaces.
  • Ensure that the square footage accurately represents the space available for use.
  • Take note of any discrepancies or variations in the reported square footage.

04Step 4: Calculate the Cost per Square Foot

  • To calculate the cost per square foot, divide the total cost by the square footage.
  • Divide the total cost by the square footage to determine the cost per square unit.
  • Round the result to two decimal places for a more precise calculation.
  • The resulting value represents the average cost per square foot of the commercial property.

Conclusion

Calculating the cost per square foot is an essential step in assessing the financial viability of a commercial real estate property. By considering the purchase price, additional costs, and square footage, you can determine the average cost per square foot. This metric provides valuable insights into the property's profitability and can influence investment decisions. Remember to account for any income generated by the property to calculate the net investment accurately. Use these calculations to compare properties, negotiate favorable deals, and make informed investment choices.

MethodsDetails
Step 1Gather basic information about the property.
Step 2Calculate the total cost of the property.
Step 3Determine the square footage accurately.
Step 4Calculate the cost per square foot.
cost per square foot
commercial real estate
property profitability
return on investment
negotiate deals