Is market price usually lower than replacement cost?
I guess it depends on the market
Your tone suggests yes
For commercia real estate, market price is set by cap rate, which is really the percent return you can get for a given market based on the rents you are receiving. It usually ranges from 4-10 percent per year return, assuming you have no mortgage. Replacement cost, obviously, is the construction cost to build the building as it stands today. So, it varies depending on the market.
reply