Rental Property Investor · Santa Rosa, CA · Member since 2013 · 38 posts · 4 votes
So I Was Cruising one day and Saw a FSBO on a commercial building.So I called the seller and saw the asking price was 395,000. She said she is firm on her price(only said she would reduce by 5k)anyway so i went home to do some research on the property and cant really find what i need! Tax records only show a value of about 150,000 and because they own it out right and have never rented it out (always ran there own business out of there)I don't really know how to come up with a cap rate or the gross rent multiplier to establish value! does anybody have any suggestions on how i can come up with a value for this place. As it stands i don't know if its a good deal or not>Please Help!!!
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
How much would it rent for in the open market? What are cap rates of comps? Those answers should get you so somewhat close. If you are serious, you should get a real commercial appraisal. Your bank will require it.
Developer · Philadelphia, PA · Member since 2013 · 87 posts · 62 votes
12y
Dave,
Here is a few things you can try:
1. You can talk to a few commercial leasing agents about rent comps in the market and also the potential cap rate on that type of structure.
Cap Rate Breakdown (very high level):
Retail Cap Rate: 4.5% - 7% (depends on the credit of the tenant... example: McDonalds trades at a 4% cap, while PNC & Wegmans trade at about a 5.5% cap) Apartment Cap Rate: 5.5% - 7% (depends on the condition and vacancy %) Office Cap Rate: 8% - 10% (depends on the condition of the building and the credit of the tenant)
2. Call CoStar
- They are the experts when it comes to compiled information on commercial real estate.
3. Broker's Opinion of Price
4. If you really are interested in the property, ask the seller if you can put it under option. Once under option you can begin to approach tenants about the space to see what they are willing to pay. Send out Letters of Intent to tenants-- you will quickly see what the market commands.