Industrial metal building value

[Phillip Martz]

I have an opportunity to buy direct from the owner a 5000 square foot metal building with an attached 1200 sf office. Less than an acre of land but it's on a highway in a medium sized town, close to town. It was built in the 80's and is not in perfect shape but it's perfectly usable. He wants $225,000 for it. He has a renter paying $2500 a month. It looks like my costs will be around $1500 a month with mortgage and all. Question is, is it worth it? Seems like the asking price is high or the rent is low because $1000 a month seems low. Thoughts?

[Dustin Allen]

@Phillip Martz

Try looking at how much it would cost to replace the building if you can't find anything to compare to. Being a commercial property you would use a cap rate to determine if it's typical for your area and that type of property. CAP rates do not take into consideration the financing costs.