How can I determine the PSF price of a property?

In Buying Property - Asked by Bill B. - Sep 28, 2010

Mike N.
Broker/Agent
Holland, MI

One way would be to determine the owner's required return on investment, using a cap rate is somewhat standard; i.e, if the development's cost is \$750,000 for a 10,000 sq. ft. building and owner would like 11% or potentially \$82,500/year. That would equate to \$8.25/sf for base rent.

Sep 29, 2010
Rob B.
Chandler, AZ

Bill....
First step, asking price divided by square footage of improvements if purchasing a income producing property. Or, asking price divided by square footage of land if a land purchase. Second step, actual purchase price on a completed sale by the same process.
In both cases you are in a position to do comparable analysis with other like properties in the market area.
Onward and upward....
Rob Baird, CA RE Lic. #544165 (One of the oldest, active licenses in CA)
951 515-5855

Sep 29, 2010
Daniel L.
Broker/Agent
Lake Worth, FL

If it is Land:
Multiply the number of acres by 43,560 sq.ft. . This will give you the totle sq.ft. IE 2.34 acres x 435690= 101,930.04 sq.ft.
or
a Buiding that is 125 feet wideby 75 feet deep has a sq.ft: 125'x75' 9,375 sq.ft.
Dan Lewis
Daniel P. Lewis, SIOR, CCIM
D.P. Lewis & Associates, Inc.
Industrial, Commercial and Institutional REO Solutions
561-964-0700
561-964-5551 - Fax
561-629-4999 - Cellular

Sep 30, 2010
Justin C.
Property/Asset Manager
Wichita, KS

Bill,
To determine the yearly price per square foot of a property a simple equation. If you already have an idea of how much you want to rent the property that you are buying then just take the rent amount times 12 divided by the square footage.
For example, if you know you want to rent a 3,000 sq. ft. building for \$2,500. Then take 2,500x12 / 3,000 to get \$10 per sq. ft. Or if you want to go the other route and figure out how much \$8 a sq. ft. would be fore a 3,000 sq. ft building, then take 3,000x\$8 / 12 to get \$2,000 for the monthly rent.

Oct 7, 2010