Evaluating a commercial retail building

[Wogderess H.]

hey guys 

I know how to evaluate a multifamily apartment building. But recently I came across a commercial building with retail stores. How do you evaluate something like that? 

Purchase price is 450K

5 stores leased at 50K total annual lease for 10 years. 

This seems to be very good in the surface but I want experienced people's opinion before I charge ahead.

Thanks!

[Zach Mitchell]

You need copies of the leases to know how each one is structured. One could be different than the unit next door. The overall analysis is still the same, income minus expenses = net income but it can get very detailed. The most accurate way to value a retail building is the discounted cash flow analysis but that's very detailed. Do a quick google search to get an explanation. Using the direct cap method with a cap rate and net income to get to a value can work but it just depends on the amount of units and the lease structure.