How do you run comps on commercial or mixed use properties?

Question

I'm working with another wholesaler and we have a potential commercial, actually mixed use deal that we could wholesale, but neither of us have ever run comps on a commercial property. How do you go about finding comps on a commercial or mixed-use property?

Syed H. · Answer

You won’t be able to price it appropriately without talking to some commercial brokers and/or costar.

Commercial properties are valued differently. They’re not just based on a cap rate since many deals are heavy value add. Commercial properties of larger sizes are usually evaluated using an IRR/MIRR.

Rob Mackowski · Answer

@Shaun Morgan find out what the NOI is and what cap rates are in the area.

David M. · Answer

My day job is property tax consulting, which involves a lot of cap rate, market rent, and vacancy loss analysis.  The go to solution in our industry for this information is CoStar COMPS.  However, as I mentioned above, they know they have the market cornered, and charge like it.  At my 200+ person national firm, our CoStar license was a top five annual firm expense.  CoStar even went so far as to acquire LoopNet a couple of years ago, which had previously been an autonomous company.  Almost seems like they can now control which information is "free" through loopnet, and which is only available through a data subscription at CoStar.  I'm sure that is merely a coincidence.

At any rate, the only other option I can offer is to speak with a commercial broker.  They ought to know what cap rates look like for their comp set.

Good luck with your deal!

Shaun Morgan · Answer

@David M. Thanks for the pointers. I looked at loopnet and not all of the properties have cap rates listed. Do any other sites like that list cap rates?

Shaun Morgan · Answer

@Brandon Wells thanks for that clarification.

David M. · Answer

Check loopnet.com for comparable listings and see what the stated cap rates are.  Not ideal as they are listings and based on the seller's unverified information, but at least comparing enough properties should point you in the right direction.

CoStar COMPS is the best product for market rents, vacancy rates, etc. but also a not inexpensive subscription service.

Good luck!

Brandon Wells · Answer

NOI ÷ Sale Price = Cap Rate @Brandon Wells

Brandon Wells · Answer

Typically you will find similar product types that have sold recently, and average those cap rates.  In lamest terms, for this examole, cap rate is the NOI ÷ sale price. @Shaun Morgan

Ronald Rohde · Answer

Closed transactions, product type, location density classification (metro, suburbs, rural, etc.)

Shaun Morgan · Answer

@Rob Mackowski how do I go about finding cap rates for my area?

How do you run comps on commercial or mixed use properties?

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