Seller Financing/Cross Collateralization/Appraisal

[Jim Norton]

Hello, I am in negotiations to buy a mixed use property (3 commercial units, a triplex, a 2/1 SFR, and an efficiency apartment), and need some help with valuing the property. This property is somewhat unique to the area, meaning there are no good comps for trying to determine appropriate CAP rate. The list price is 770k, which is a 7.6% CAP rate. When I break up the property and try to comp it that way, I can comp the residential pretty closely but not the commercial. I am getting to a 625k to 650k valuation, which is close to an 8.9% CAP rate. Any thoughts on how I should be valuing this property? How would an appraiser do this? I will likely use seller financing at 5% with $0 down and cross collateralize another property to put some "skin in the game" on this deal but do not want to overpay. I may have a balloon in 5 years, and my fear is that, if the seller does not want to refinance with me, I will have to go to a bank and if this property does not appraise I will be in trouble. All thoughts/comments appreciated!