How to comp Mixed-Use property

Question

Hello all, I'm in the DMV area and I currently have a Mixed-Used property that I need help comping somewhat. The property has an apartment on the top floor, a beauty salon on the main level, and an unfinished basement. The properties condition isn't bad, but does need some upgrading. The seller's asking price is actually in the neighborhood of the sales/asking price of the other comps which is good. What I'm curious about rather is should I be comping this property as a normal property or as a commercial property since it is mixed-used.

-Any advice?

Charles Carillo · Answer

@Antonio Thomas

Finding the value of mixed-use properties can be a little tricky. You said there are comps of other properties for sale at a similar price. What I would want to know is what similar properties have actually sold for recently. This is going to be much more helpful. Yes, it is a commercial property and it normally is valued off cap rates,  but by checking sale comps, you have an idea of roughly what properties are trading at, and you can work backward. I would review the property's current and potential NOI (after you complete repairs/renovations). Be conservative in your rent projections and overestimate the repairs.

I am not sure what the age of this property is, but I have found with older properties (mixed-use and apartment complexes), there are several variables that are typically not an issue with newer properties. Like small apartments, grandfathered-in apartments, or access ways that would never fly with new construction. This changes what units can be rented for and the property's overall value. This is why you really need to review the comp sales versus the subject property to make sure you are comparing apples to apples (or as close to). For example, your property has a weird attic apartment, and the sale comp has a normal apartment. Which location is better, and how will that change my rents and value?

Antonio Thomas · Answer

Thanks, That's what I was already doing just wanted to make sure I was going in the right direction. Much appreciated my friend!

Russell Brazil · Answer

You should comp it against like kind properties