How do I figure out comps for a commercial building?

Question

I am completely new to real estate I have been looking for deals to bring to a partner that will help.

I found a commercial building that used to have a dentistry business in it and I want to find out if it’s a lead I should bring to this partner.

So how would I figure out if it’s a good deal or not for free and online?

Ronald Rohde · Answer

Vacant buildings are very dangerous/tough for new investors. I don't like 0% occupancy unless I'm an expert in that sub-market and industry. Ideally, I'd have a few tenants through my broker already in mind when I purchase. Lenders don't like that risk either and will be skittish.

The main thing is I'd find a tenant, then bring the deal to a partner.

Benjamin McCrite · Answer

Perfect @Scott Krone thank you I really appreciate it, being a new investor this really helps a lot.

Scott Krone · Answer

@Benjamin McCrite "I have a property I am interested in buying.  Can you assist me. It is not on the market.  If we close and the Seller won't compensate you, we can build that into our pricing."

Scott Krone · Answer

@Benjamin McCrite  As @Logan Hartle suggests using a broker can help you assess commercial properties and determine the value.  Ultimately the zoning (allowable uses), Net Operating Income and CAP rate set the values in commercial properties.  Loopnet is a free resource you can use to research properties.

Christian Decker · Answer

@Benjamin McCriteCongratulations at finding opportunity! Personally I love buildings that are 50% to 100% vacant because it holds opportunity, but I'm also an expert in Commercial real estate. It is what I do exclusively on a daily basis. I know my costs and my market. Commercial real estate is valued specifically off of the Net Operating Income (NOI). Higher NOI, higher value of the building. Vacant buildings are typically valued off of a pro forma NOI once factoring in down time, Tenant Improvements, Leasing commissions, etc. This is when you want to find a Very Good leasing agent. Ask them what the building can lease for and what to expect on expenses. If you are wanting to keep it medical dental, be prepared for a looooong lead time on the leasing. Think of it this way. Anyone can rent an apartment so your "renter pool" is fairly large, but there are only a handful of dental or medical professionals moving out of a current location, expanding or starting new practices. This is the risk of commercial real estate. I own a 14,000sf medical dental building and am a Commercial sales and leasing broker so I know the industry very well. Let me know if I can help anyway!

Ronald Rohde · Answer

Talking to businesses, you can try cold calling or emailing. I don't think an RE agent is going to give you his tenants, he would just find them a space without you.

Benjamin McCrite · Answer

Ok I see that definitely make sense. Thank you I appreciate it @Ronald Rohde How would you recommend finding tenants before I buy a property just post on websites or go through the RE agent?

Logan Hartle · Answer

I like Scott’s approach. Brokers work for commission and would prefer to be “in the deal” as opposed to pulling data for $.  A good broker should be more than happy to help out if you are up front and the expectation is that, if the seller will not compensate, you will.

Benjamin McCrite · Answer

Perfect thank you so much for the reply’s. @Logan Hartel @Scott Krone

So how would you recommend I word it to a RE agent?I definitely want to compensate them for helping me but I’m so new that I am probably not going to sound like I know what I’m talking about.

I have networked and I found an agent but how would I get them to help me just say I have a property that I want to pull comps for and see if there able to help me, but then what do I offer them?

Logan Hartle · Answer

Hey Benjamin. If you find a good commercial broker, explain to them your growth plan & how they could be a part of it, they may help you run comps for free.

Otherwise check out recently sold vacant buildings in that area of your town. You should be able to find some of this through your county site, perhaps crexi, etc.

Also get a good understanding of lease rates for those types of buildings and if they are triple net, double net, gross leases, etc.

From there, understand what different types of leases/tenants will command what cap rates on a sale for this asset type. (Absolute NNN national household name with 15 yr lease with rent bumps vs gross lease with local company will generate wildly different sales prices)

ultimately I believe making good friends with a broker makes sense.

How do I figure out comps for a commercial building?

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