how do you price a commercial building has 7 tenants for sale

In Selling Property - Asked by Mike A. - Dec 6, 2009
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Robert M.
Lafayette, LA

You can begin with the free cash flow for debt service that is generated from the tenant income of the property. The free cash flow is cash generated after subtracting operating expenses such as property taxes, insurance, repairs, and an amount for refurbishing at some point(such as changing the roof, HVAC units etc ) that are the responsibility of the landlord. Take the cash flow amount and divide it by the percentage of return that you want on your investment. For example, if you want a 10% return on your investment, you can pay $ 360,000 for the property if it has net income of $ 36,000 annually. The next step is to use the current vqlue of the property for its current use and also figure out what the property may be worth into the future. For example, if you have knowledge that a casino may want the property for a parking lot next door to their expansion, the property will have a new value and its current income and use play no part in its value. If it is to remain in its current income use, then the value is going to be tied to the cash flow unless the property is in deterioting condition.

Dec 7, 2009
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Richard F.
The Woodlands, TX

you base if off the income that it generates and sell it off a cap rate based on the annual revenue

Dec 7, 2009
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Ed H.
Listing Administrator
Kansas City, MO

You "proforma" the potential rent to be received based upon the local market for similar type property take out actual expenses to derive the net income then divide this by a capitalization rate again based upon the local market/similar properties.
Easy - you can also do to an "actual" rent scenario.
Kansas City, MO

Dec 7, 2009
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Chris S.
Coeur D'alene, ID

Cost Approach - what would it cost to replace it today?
Income Approach - how much income does it generate?
Sales Comparison Approach - what are comparable buildings SELLING for (not listings)?
If you have not evaluated a building for sale before, now is not the time to start. Contact an experienced broker, it will be well worth any cost.

Jan 22, 2010
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Gregory G.
San Francisco, CA

Cap rate.
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531

Mar 5, 2010
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