how find out the sale price for my comercial property

In Selling Property - Asked by elba r. - Mar 9, 2011
Report Abuse
Answer this Question

Answer(s)

Jim F.
Broker/Agent
Falmouth, MA

You first need to develop a income statement and then a 5-10 year cash flow.
Then we can research what similar properties in the same market area have recently sold for as compared to net income/ cap rates and or Gross rent multipliers

Mar 9, 2011
Report Abuse
Dan P.
Broker/Agent
Phoenix, AZ

The Income approach as Jim describes is correct for most commercial property. If yours has been vacant for quite awhile, your income statement will be adversly impacted hence lowering the value obtained from that standpoint.
If you have multi-family properties (or a couple other specific types), a Sales Comparison approach could also be used. For example, an apartment building sold for $50,000 per unit, or $X per square foot. This approach is most often used for residential property.
If your property is something very unique for the area and/or there's an option to build instead of buy, the Cost approach could be used. For example, if it costs $100 per square foot to build a building like yours in your area, multiply that by the square footage of your building and add the site costs (raw land plus improvement costs) to arrive at a value.
All of these approachs are what an appraisers and brokers can use to value a property. If you're still unsure about what the value might be, running these numbers, have it appraised.

Mar 9, 2011
Report Abuse
Dan P.
Broker/Agent
Phoenix, AZ

oops...should be "after" running these numbers on last line.

Mar 9, 2011
Report Abuse
Rob B.
Chandler, AZ

Elba….
The other two answers to this are good. I have a slightly different version of these answers that I hope will also be helpful.
A very important document for developing your value is at least two years actual operating history. (An income statement). From this statement your can do a proforma on what a five or ten year future net operating income would be.
By researching other properties sold within the past six months you will be able to establish a specific market, specific type of property, cap rate. You should have at least 7 properties and a good cap rate may be the mean of the properties.
This will work for a standard occupancy property. (Within an acceptable vacancy level for your buyer’s financing).
If your property has a high vacancy factor, you will likely blend the cap rate that can be applied to in-place rents with a reasonable achievement period for the value- added factor of increasing occupancy and leveling or increasing rents.
There are also other property comparisons made such as cost per unit, cost per square foot, replacement cost and quality of location and property.
The strong guiding light on pricing is going to be market supply and demand. The greater the demand for your property the better premium you can use in pricing.
These guidelines will work if you or a close advisor knows what they are doing. However, when in doubt hire a professional appraiser. This is always your best bet, even though sometimes you may not like the value placed on the property. It’s amazing what an objective, 3rd party person will provide! Good Luck Elba…. Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Mar 11, 2011
Report Abuse
James S.
Broker/Agent
Lexington, SC

While this is going to sound self serving, find a competent Broker who understands your market. This Broker needs to be honest and not just looking for the listing or sale. Make sure this Broker is a Commercial Broker as that is vastly different from residential real estate. Please remember if you find a Professional who is honest and good at their profession, they will be glad to help you and should be able to value the Property based on the varied criteria very accurately. I know my market and within hours of us meeting to view and discuss a Property I can give you an accurate range based on your needs. Do not undervalue the Brokers opinion at their profession as you would not discount a Doctor or Lawyer for their medical and legal opinions.

Mar 11, 2011
Report Abuse
Joe L.
Broker/Agent
Dallas, TX

To further expand on James' comments about brokers, realize that when you're discussing price with a broker, you're not negotiating price. Too often, a seller will "shop" brokers and list with the one who quotes the highest price. The broker's not offering to buy your building. He's giving you his professional opinion about the most likely selling price, given your timeframe and needs.
Realize that the broker who's quoting you a lower value may in fact be the most honest and professional of the bunch. Often new, unexperienced, or just plain dishonest brokers will quote you an unrealistically high value and expect the market to beat you into submission after months of trying to "market" an overpriced listing. Demand that the broker back up his value estimates with hard numbers, especially if the quoted values seem unrealistically low or high. Remember, there's no such thing as a free lunch.

May 4, 2011
Report Abuse
Tai N.
Broker/Agent
City Of Industry, CA

Elba, I completely agree with Joe and James. You should hire an honest and competent commercial real estate agent/broker to help you with your asset. I am not discounting what Jim, Dan, and Rob says, as what they said is correct. Keep in mind that brokers do this day-in, day-out, and so hiring an professional will not only help you close the transaction quicker, but may net you more dollars at the end of the day. Aside from being a broker, I own commercial properties through partnerships. And if and when we are discussing dispositions of our own properties, we always talk about who could best market the property and net us the most money. Sometimes it is enlisting the help of another broker...

May 26, 2011
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question