I'm looking to buy a business for it's assets (it's a construction rental business). There is a piece of property that has great access and road frontage that's about a 3/4 of an acre with a house on it. The house is old and has not been used for several decades except as the occasional office space. The property is zone for light-residential usage. The business has been paired down since the owner wants to retire (he went from $1M a year in business to $350K by selling equipment and not having as big of an inventory.
I know multi-family is appraised on NOI x cap rate instead of using comps for residential. Is light industrial/commercial property appraised by comps? If I use NOI, it would skew the value since he's downsized the business.
With that said, what would be the method to value the property as an asset?
Real Estate Appraiser · Austin, TX · Member since 2016 · 19 posts · 20 votes
6y
HBU is probably the most important question. If the HBU is to have this SFR operating as an office for a light industrial use then you would value it just like any other income producing property. What is market rent? Your business income doesn't have much to do with valuing the asset so figuring out market rent can get you to gross income which can get to NOI for the income (direct cap) approach. So basically, what would you pay yourself for rent?
You could also use the sales comparison approach and find sale comps. In my market there are a lot of properties that have an old SFR with a large lot that is used for used car sales. Maybe that is another light industrial use that is similar to what you have? I hope that helps.
I'm looking to buy a business for it's assets (it's a construction rental business). There is a piece of property that has great access and road frontage that's about a 3/4 of an acre with a house on it. The house is old and has not been used for several decades except as the occasional office space. The property is zone for light-residential usage. The business has been paired down since the owner wants to retire (he went from $1M a year in business to $350K by selling equipment and not having as big of an inventory.
I know multi-family is appraised on NOI x cap rate instead of using comps for residential. Is light industrial/commercial property appraised by comps? If I use NOI, it would skew the value since he's downsized the business.
With that said, what would be the method to value the property as an asset?
The value of the land will vary greatly depending on the location, demand, topography, current utilities to the property or proximity and the Highest and Best Use of that property. Also you will want to make sure to check for or get a phase one environmental study if there has been equipment and fuels used or stored on the property.