All Forum Posts by: Carolyn Yates

Costar and Loopnet. It is always best to have market participants which could be brokers/owners or tenants of other buildings.  In my experience, most people hate to divulge what they are paying/receving for rent though.  

Love that you are interested in getting connected and starting your real estate journey early.  I ended up going the appraisal route and worked for appraisers as a researcher during college.  I am not sure if you have any marketing or photography skills, but I bet a local commercial real estate office would love to have you as an intern.  It would be a great way to see if this is really something you want to pursue.  In high school I thought I wanted to work as a stockbroker and interned doing cold calls for an investment group.  I learned quickly that was not what I wanted to be when I grew up!

@Joel Owens hit the nail on the head.  The property should be valued at its highest and best use and of course part of the consideration is what is allowed legally and what is physically possible on the site.  A commercial appraiser should be able to value the land for you which would include identifying the highest and best use.

So you are purchasing the going concern?  Or are you looking at this as just a real estate deal?  As the others have said you have to reconstruct the operating statements and they are only as reliable as the available data.  Some appraisal firms specialize in property types such as car washes or self-storage. With the amount of data they have on similar properties/businesses, they may be able to reasonably reconstruct the operating statements and provide a good indication of value.  Even if the owners do provide the statements if it is not what they report on their tax returns it may not be reliable either.

I would say money spent on a commercial appraisal would be well worth it. I am not sure what type of property you are leasing, but post covid the value and demand for office space and many other types of commercial space has changed. If you are getting a loan for the purchase the bank will order one. They will not be able to use the appraisal if it is ordered by you. In short, the value should be the NOI/cap rate, but of course the overall rate is so market and property-type specific.

In some of the more in demand areas it is harder to cash flow because the asking prices are so high.  You do have to look at a lot of properties to find some that make sense.  I would be reluctant to invest in one that required so much out of pocket from me unless the appreciation is anticipated to be great.

Here are a few:  Real Estate Kate – FIX & FLIP, BUY & HOLD, DISTRESSED, OFF-MARKET, REAL ESTATE (realestatekatefl.com)
Adam - 941-250-5980

Here is some information on the real estate investment group in Sarasota. Sarasota REIA I am glad to share my knowledge of the STR market as well. Feel free to reach out.

From an appraisal standpoint, you would look at the market and see how land is sold for this type of development.  Most often it is sold by price/developable unit.  Is the land already entitled?  Either way, you would be looking for similar comps.  If you are not able to find market data then you could value as indicated above which is known as the residual method.  If valuing by the residual method, you would want to consider time.  As there will most likely be an extended period of time before the project is completed.  That $400,000 in the example above would be most likely worth less than that today.

From an appraisal standpoint, the appraiser should value the property as if it were stabilized or at market occupancy/rent.  Then they would deduct the lease-up costs to get to that point.  The lease-up costs would include loss rent, rent commissions, and profit for leasing up the building.  This could be a nominal amount depending on how many units are vacant or below market rent.  If this is for below-market rents and the tenants are under a lease then you would have to deduct the rent loss from their below-market rents for the remainder of the lease term.  I hope that helps!