CRE investors. 16k/mo rent @ 1.3m price. Is that good?

4 Replies

*this is not a solicitation, I’m asking opinions on ROI.

I have a local client that will be selling off his building.

Is $16k a month in rent for a $1.3m commercial building something you experienced guys would entertain? What is your target rents at that price point?

(860) 990-3030

CRE does not follow the 1%-2% rules, it's all based on cap rates, which is annual NOI/purchase price. You should base your sale price from taking the property NOI applying a cap rate (you'll need to do research about your market and that asset class in that market). For example if we assume you have an expense ratio of 45% on that 16k monthly rent, we get an annual NOI of $105,600. If you worth $1.3MM that means your assuming a cap rate of 8.12%. I can't tell you what cap rates go for in your market, you'll have to find that yourself.

Originally posted by @Charles Kennedy :

CRE does not follow the 1%-2% rules, it's all based on cap rates, which is annual NOI/purchase price. You should base your sale price from taking the property NOI applying a cap rate (you'll need to do research about your market and that asset class in that market). For example if we assume you have an expense ratio of 45% on that 16k monthly rent, we get an annual NOI of $105,600. If you worth $1.3MM that means your assuming a cap rate of 8.12%. I can't tell you what cap rates go for in your market, you'll have to find that yourself.

 45% seems high, but that being said I agree with what you said.  Figure out your cap rate and go from there, just on a ballpark number, and knowing nothing about your particular market or asset, I could see it being an ok price.  But there are a lot of things that I don't know about the property.  Should we assume it is a multifamily?  

Depends on type of building, length of lease, similar vacant space in your area, what market rents are, and what expenses the owner is willing to take on.   Look up similar space and see what rents they are charging. 

@Jarrod Kohl sorry for my initially vague post. It’s a newer multi bay building with 13’ doors. There are two other houses on the same property that are rentals as well. It really doesn’t fit standard pricing. I’m not selling the property or a representative of the seller. I’ve gotten it lined up for financing @ 75% LTV (buyer dependent of course). I don’t invest in commercial at all, so my idea of fair return is meaningless for this deal.

(860) 990-3030

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