When assessing commercial real estate plot for sale in bahria enclave Islamabad, you have to comprehend the financial implications which the property's creation creates. This is the case before you decide to price the property or assess whether it is appropriate for purchase. This is because it's not only the financial factors today that you must consider in addition to the ones that have formed the background of the property over recent time.

In this instance the definition of "recent moment' means the last three or five years. It is surprising how property owners try to manipulate the expenditure and income of their buildings when they sell the property; they cannot however easily alter the history of their property and this is the reason you'll discover numerous properties secrets.

When the past and present results of the property are completely understood, you are able to then relate to the accuracy of the current operating cost budget. Each investment property should be subject in accordance with a budget maintained monthly and analyzed quarterly.

The process of monitoring quarterly permits adjustments to the budget when unusual aspects of income and expenditure are obvious. It's not worth continuing with the budget for property which is becoming more and more unbalanced to the actual performance of the property. Fund managers of complex properties typically make budget adjustments on every quarter. The same principles could be applied also to investors who are private.

Let's take a explore the key issues of financial analysis on which you should focus the evaluation of your property:


  1. A tenancy schedule is required for the property and checked totally. What you're looking to find here is an accurate summary of the lease occupancy and the rents paid. It's interesting to observe that tenancy schedules are often in error and are not up to up to. This is a common industry problem stemming from the lack of diligence on the part of the property owner or property manager to keep the tenancy records. In this regard, the accuracy of the tenancy schedule at the time of sale is to be checked against the original documentation.
  2. The property documentation that covers the various types of occupancy must be sought out. This documentation is typically the lease, occupancy licence, and agreements with tenants. You should expect that some of this paperwork isn't registered on the property title. Solicitors are very familiar with the procedure of searching for all property documentation and will be able to identify the right questions to ask of the previous property owner. If you are unsure, conduct an extensive due diligence procedure together with the solicitor before the settlement being signed.
  3. The rent guarantees and the bonds of any lease documents must be sourced and documented. These issues protect the landlord at the time of default on the part or the tenants. They must pass on to the new owner at the time of settlement. How this happens is subject to the type of rental guarantee or bond. It may be that the guarantee must be renewed at the date of settlement or sale to a new property owner. Solicitors for the new property owner(s) are usually able to verify the issue and suggest a solution at the time of the sale. In addition, rental guarantee and bonds have to be legally collected by the new property owner as per the terms of the lease documents in place.
  4. Understanding the type of rental that is charged across the property is essential to property performance. For a single property that has many tenants, it is normal for different rents to be charged across the different leases. This means that both net and gross leases may be apparent in the same property and may have different implications on the rental income of the landlord. Only way for you to fully appreciate and analyse the complete rental scenario is to study every lease thoroughly.
  5. Finding outstanding charges for the property should be the next part of your analysis. These charges would normally stem from the local council and their rating procedures. It could be that special charges have been raised on the property to be a Special Levy for the precinct.
  6. Understanding the outgoings charges for the properties in the local area is essential to your own analysis of the property. What you should do here is to compare the averages of outgoings for similar properties local as well as the property the which you're involved. There must be commonality or parity between particular properties in the same category. If a particular property has more expenditures due to any reason, that reason should be determined prior to any sale or adjustment to the property is made. Buyers of property do not desire to purchase something that has a financial burden that is higher than the typical industry expenses.
  7. The depreciation program for the property needs to be updated each year so that the benefits can be incorporated into any property sale strategy when the time comes. Depreciation for the property allows the revenue to be cut and therefore less tax will be owed for the property owner. It is common for the accountant for the owner of the property to create the annual depreciation schedule at tax time.
  8. Taxes and rates for the property to be documented and understood. They are closely tied to the property valuation undertaken by the local council. The timing of the council valuation is usually every two or three years and will significantly impact the tax and rates to be paid during the valuation year. Property owners should be prepared for moderate rating increases in the year when a property appraisal is to be undertaken. It is important to determine when the next property valuation within the region will be undertaken at the discretion of local officials.
  9. The survey of the site and the tenancy area of the property need to be checked or undertaken. There is a tendency for discrepancies to be observed during this process. It is also important to look for extra space in the common areas of the building. This could be turned into tenant space as part of any new tenancy initiative. The surplus space can be an asset when you remodel or expand your property.
  10. In analysing the historic cash flow, examine any negative impact that is caused by rent reduction incentives and vacant spaces. It is quite common to see a reduction in rental in the first month of the lease tenancy as a rent incentive. If you discover this, the paperwork that supports the incentive need to be reviewed and sourced to determine the accuracy of the information and its ongoing impact to the cash flow. You don't want to purchase a property only to find your cash flow reduces annually due to an incentive agreement. If incentive agreements are in place it is recommended to convince the current property owner to release or modify the effect of the incentive prior to the date of property settlement. That is, the existing property owner should pay the new property owner for the discomfort the incentive can cause in the future for the property.
  11. The current rentals in the property need to be compared to the rental market in the area. It could be that the rent on the property is insufficient to market rents in the region. If this is the case it pays to understand what implications this could have on leasing vacant spaces that arise, and also when negotiating new leases with current tenants.
  12. The threat of market rental declining at the time of rent review is a real problem in this market that is slow. If the property is subject to market rent review clauses and leases are required, they need to be checked to identify the possibility of the rental falling during the market review period. There are times when the lease contains special terms that can prevent the rent going down even if the surrounding rent is already at that level. These clauses are known as "ratchet clauses," implying that the "ratchet" process will stop lower market rents from occurring. Be careful here though in that some retail and property laws can block the use or application of the "ratchet clause'. If in doubt , consult an experienced property lawyer.


These are the essential financial elements to look at when assessing the value of an Investment Property. Be sure to examine both the earnings and expenditure of the property prior to making any decision regarding the price of the property or its acquisition.

John Highman is a prominent investment real estate speaker and coach that assists real estate agents and estate brokers worldwide to improve their commercial real estate market share and their performance. John Highman himself is a highly successful real estate agent that has been specialized in commercial, industrial, and retail properties of different types for more than 30 years.