Business owner. New investor

5 Replies

I could use a little help. I am considering a commercial property for sale by owner. I do not know how to determine its value.  He’s asking 590,000 and rents would be 1700+1200+2500.  Taxes 15000.  Great location bad parking. 

Without knowing a whole lot more like expenses, type of building , condition, location, history of occupancy, etc. it looks like it’s priced high for a smaller 3 tenant property.

You need to figure out what the net operating income is. Take the income above and subtract all the expenses. Make sure that you actually get financials from the current owner and then VERIFY them. Don't take their word for them. Get copies of the leases and figure out how much each tenant has left. Also, get rental histories (or verify the income) to make sure that the tenants are actually paying.

You'll also want to find out how much similar properties have been purchased for in the area.

You can reverse engineer the value by figuring out the cap rate. This will somewhat depend on how much risk that you want to take or how risky others would view this investment.

Depending on location limited parking might not be that big of a negative if it is in a walkability urban core type area or small city town where everyone walks around to businesses.

If it's a destination type spot in a strong suburban but with lot's of greenspace and no nearby cross anchor areas for overflow parking then having a bad design for parking can be a big negative. Tons of variables. 

Originally posted by @Alison Lager :

I could use a little help. I am considering a commercial property for sale by owner. I do not know how to determine its value.  He’s asking 590,000 and rents would be 1700+1200+2500.  Taxes 15000.  Great location bad parking. 

 Are you going to occupy? Any vacancy?

Hi. I on the property next to it. I plan to occupy 1/3 of it and rent 2/3. 1/3 is already rented at 1700. The other part is vacant at 1200 rent as per owner. The part I will be using is about 2000 sf. My business will pay about 2500-3000 for that portion. It needs to be renovated. So that will also be my cost.  I appreciate you asking thank you!!