Atlanta, GA · Member since 2014 · 64 posts · 5 votes
I'm currently moving into the commercial world of real estate. I think that this niche pays off a little better than SFH's. I can find the deals through certain websites and other resources, but i hav barely a clue on how to actually pull the comps. I mean, is it as simple as finding a few recent sales within a few miles on zillow or is it as complicated as finding a commercial RE agent who I'd have to pay to give me a CMA? Is the term CMA different for commercial? How would I find comps for other commercial properties like gas stations and hotels? Do I just have to go by the actual numbers like revenue from last owner and taxes? I just need to be pointed in the right direction because I get deals in my inbox from people I communicate with all over the country.
To add onto what others have shared, in the most simplistic terms, apartment complex values are based on Net Operating Income, or NOI, and the cap rate.
Price = NOI / Cap Rate
So, if an apartment complex has an NOI of $100,000 and a market cap rate of 10%, the value is $1,000,000.
Listing agents for complexes love to price based on a pro-forma, which is utter nonsense (unless you're in Austin, in which case apartment complexes apparently have floors made of gold). Also know that you can't necessarily trust the NOI as presented, you must, must, must run the numbers.
Loopnet has some comp information, but requires a paid (and not cheap) account to see it.
Commercial properties are generally valued based on income, not comps per se. So, comps can help with figuring out local cap rates, then you need the income from the property to determine a value.
@Joel Owens may have better insights. He works in this space.
Commercial properties are not evaluated by "comps" (well not exactly) they are evaluated on cash flow. Where comps come in to to compare "cap Rates" (a measure of financial performance) of recent sales.
In the commercial world financial data is almost always given when a property is being sold. However that data is not necessarily worth a damn. At least you have a starting point. Once under contract you do significant more due diligence to verify the data you have been given.
Commercial properties are listed on places like LoopNet or much better CoStar. Access to these, I do not believe requires a license, but it is in the thousands of dollars for access at the level you need.
If you are serious I recommend Costar above all. They own Loopnet as well, but Costar is much more robust.
You can view most existing I general and gather a tremendous amount of information.
It is the best of the best I have found. Likely will pay 300 plus monthly with a one year commitment, but I get my best info (even that is lacking) from there. you will still have to hit the phone, keyboard and pavement, but accuracy and reports are superior.
To add onto what others have shared, in the most simplistic terms, apartment complex values are based on Net Operating Income, or NOI, and the cap rate.
Price = NOI / Cap Rate
So, if an apartment complex has an NOI of $100,000 and a market cap rate of 10%, the value is $1,000,000.
Listing agents for complexes love to price based on a pro-forma, which is utter nonsense (unless you're in Austin, in which case apartment complexes apparently have floors made of gold). Also know that you can't necessarily trust the NOI as presented, you must, must, must run the numbers.
Good Morning @Michael Tempel I looked into CoStar, is this only for commercial style properties? I requested a demo a few times but cannot seem to get a response. Just curious if they do all properties or just a larger property.
Mike - Yes, I would say it is best for properties 10 units and up, but the best I have found. I don't have a good solution for smaller properties, but would be interested in that solution as well.
@Michael Tempel Reventure App has a cap rate at a zip code level based on residential. I think that's pretty good based on qualitative data.https://map.reventure.app/