How to Calculate Price, Expenses, and Income for Investment Properties in New Mexico
A commercial real estate investor in New Mexico will need to understand how to calculate the price, expenses, and income of an investment property, whether located in Santa Fe or Albuquerque. A potential buyer of an apartment building in New Mexico will need to consider price, expenses, and income, as these operating factors relate to the multifamily’s square footage.
This relationship is important because an investor in New Mexico will typically rent commercial property by the square foot and because the square foot, unlike an individual unit, has more or less constant measurable dimensions. However, a commercial property investor in New Mexico must keep in mind that all square feet are not created equal: but square foot measurements of an apartment building in Las Cruces are certainly more equal than the rental units in a shopping center in Roswell.
The only issue for a New Mexico property investor in what is otherwise a series of routine calculations concerns the definition of “square footage.” Commercial Real Estate Buyers and Landlord Sellers in New Mexico who have listed with Commercial Real Estate Brokers in Carlsbad or Taos, will toss around statements such as, “I purchased that apartment building for $130 per square foot” as a form of shorthand industry jargon.
Simply put, the CRE industry nomenclature concerning price per square foot, allows the commercial property “experts” to make quick property comparisons or “comps”. When commercial real estate brokers and agents in New Mexico refer to “square foot”, it is predetermined or often set by the local commercial property real estate market. As a rule, the term “square foot” usually denotes either gross building area (GBA) or net rentable area (the usable square footage plus an allocation of common area).
An apartment investor in New Mexico will benefit by using the following price per square foot formula for determining the value of the commercial real estate income-producing building, whether located in Santa Fe or Albuquerque. Price per square foot = Price divided by Gross Building Area (or Net Rentable Area.)
For a multifamily building located in New Mexico, an investor would calculate with the following formula: Income per square foot = Gross Scheduled Income divided by Gross Building Area (or Net Rentable Area.)
Most landlords in New Mexico rely on the following income property calculation for determining expenses: Expenses per square foot = Operating Expenses divided by Gross building area (or Net Rentable Area.)