Commercial Property Valuation

Real Estate Deal Analysis & Advice
1yFollow

Commercial Property Valuation

Ryan David Dodd
Member since 2022 · 22 posts · 18 votes

I have a "commercial" rental property in Myrtle Beach, SC and am trying to come up with a valuation for a balance sheet.  The last appraisal was in 2020 and cost $2,000!  With it being in the middle of one of the hottest markets in the USA, I have to imagine it's changed in the last five years.  I'm new to all this but I knew enough to take my father's business, which I inherited, and executed an asset sale, which is actually an amazing story (see links below), and then lease the land/building back to the buyer of the business, and I'm pleased to say we have  recently obtained a second 5 year triple net lease, increasing 3% annually.  So it's unencumbered and cash flowing. 

My question is this.  Are there any free websites that offer zillow or realtor.com level of information on commerical properies?  For instance, if I look at the neighborhood I live in, I can see all sorts of information on active and non active listings.  However, I can't find that type of information on my commercial property.   

My lot backs up to SFR and it is unfortunately zoned SF-10, which goes back to the 80's. It's grandfathered into a zoning exceptiong for "light industrial" use like dozens of other lots on Northgate Blvd 29577. If you look on zillow, sales info is available for all of the homes surrounding Northgate Blvd but not for the most businesses ON Northgate Blvd.

So, I'm trying to figure out how to 1) find a tool to estimate valuation of the building/land without paying for appraisal, and 2) figure out what is the highest and best use and rent rate potential of the property going forward. 

What say you?!

If you'd like to read about the late Master Sergeant, Lawrence E. Dodd, USAF (ret.) and his journey to Larry's Auto Clinic, Inc.

https://thecoastalinsider.com/larry-dodd-air-force-veteran-a...

https://thecoastalinsider.com/larry-dodd-air-force-veteran-a...

0Reply
58 views

4 Replies

Jump to latestLatest
  • Nick Maugeri
    Real Estate Broker · Modesto, CA · Member since 2023 · 192 posts · 77 votes
    1y

    Loopnet.com is a Zillow equal. Local CRE agents are the best resource for BOV - build relationships with market experts.

    1Reply
    • Ryan David Dodd
      OP
      Member since 2022 · 22 posts · 18 votes
      1y
      Quote from @Nick Maugeri:

      Loopnet.com is a Zillow equal. Local CRE agents are the best resource for BOV - build relationships with market experts.


       Solid advice. I appreciate it! 

      0Reply
  • William WhitleyBusiness Member
    Accountant · TN · Member since 2025 · 146 posts · 92 votes
    1y

    When you say balance sheet, I think of it from a tax reporting perspective like accounting/bookkeeping. On the balance sheet, the book value is typically what the original property was acquired for, splitting out land and improvements. Another component is capital expenditures that adjust the basis (book value) of the improvements. 

    The current value typically does not appear on the balance sheet, if you are referring to that from an accounting perspective. If you are trying to estimate what capital gains might be if you sold the property, that is something different. 

    So onto your original question: how do you come up with a market value for your property without spending money on an appraisal? Well unfortunately, there are very few resources available to do this with any degree of accuracy.

    You could see if any similar properties in your market are currently offered for sale, and that might provide you an estimated value if you calculate the price per SF and apply it to your property. However, that is not very accurate, because the asking price in the listing is not a sale price. Also, there may be physical differences between that property and your property like condition or other features. Another thing to consider is how long a property has been on the market. If a property has been on the market an extended amount of time, perhaps either there is no demand for the property or it is priced for more than a potential buyer is willing to pay. 

    As it relates to rental rates, you can research active rentals to see what others are asking on a per SF basis for their properties. But you need to know what kind of lease structure they are offering. It is triple net where the lessee is paying all of the operating expenses? Is it a lease where all expenses are paid by the owner? Is it somewhere in between? 

    Estimating market value and/or market rent is not straight forward, which is why the most reliable way is to contract with a qualified commercial real estate appraiser, but I understand the apprehension of spending the money for that. 

    Accountable Balance Bookkeeping, LLC
    WebsiteView Page
    1Reply
    • Ryan David Dodd
      OP
      Member since 2022 · 22 posts · 18 votes
      1y
      Quote from @William Whitley:

      When you say balance sheet, I think of it from a tax reporting perspective like accounting/bookkeeping. On the balance sheet, the book value is typically what the original property was acquired for, splitting out land and improvements. Another component is capital expenditures that adjust the basis (book value) of the improvements. 

      The current value typically does not appear on the balance sheet, if you are referring to that from an accounting perspective. If you are trying to estimate what capital gains might be if you sold the property, that is something different. 

      So onto your original question: how do you come up with a market value for your property without spending money on an appraisal? Well unfortunately, there are very few resources available to do this with any degree of accuracy.

      You could see if any similar properties in your market are currently offered for sale, and that might provide you an estimated value if you calculate the price per SF and apply it to your property. However, that is not very accurate, because the asking price in the listing is not a sale price. Also, there may be physical differences between that property and your property like condition or other features. Another thing to consider is how long a property has been on the market. If a property has been on the market an extended amount of time, perhaps either there is no demand for the property or it is priced for more than a potential buyer is willing to pay. 

      As it relates to rental rates, you can research active rentals to see what others are asking on a per SF basis for their properties. But you need to know what kind of lease structure they are offering. It is triple net where the lessee is paying all of the operating expenses? Is it a lease where all expenses are paid by the owner? Is it somewhere in between? 

      Estimating market value and/or market rent is not straight forward, which is why the most reliable way is to contract with a qualified commercial real estate appraiser, but I understand the apprehension of spending the money for that. 


       Thank you for that thoughtful reply Mr. Whitley!

      Ultimately, I am not going to sell this property.  It's free and clear, high demand, stable lease/business in the property, and it cash flows nearly 100%.  

      The reasons I'd like to have a good idea of the current value is in case I leverage the equity for another deal, calculating net worth, and for exploring highest and best use to maximize income and cap rate going forward.

      I recognize that at this point, much of it is over my head but I'm gonna fix that over coming months.  This one kinda fell into my lap and gave me a taste of what mailbox money feels like, and now there's no turning back. 

      You've given me a lot of food for thought, and I appreciate it. 

      1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free