Skagit County professional building - Analysis

[Dan Toomey]

Hello BiggerPockets community. I've been a long time listener to the podcast and recently took the dive into investing in commercial real estate. I recently got a commercial building under contract in Sedro-Woolley that is 3,650 square feet and is made up of two separate offices. The larger office has a long-term tenant and just got a new two year lease with an option to extend. The smaller office (around 1,000 square feet) is leased through July and the tenant will be moving out at that point. 

The gross rental income is $3,600 monthly. The building was built in the 1950's and just got a new flat roof put on last year. The tenant pay utilities so I'm guessing the taxes, insurance and repairs and maintenance allowance add up to around $8,000 annually with a R&M/CapX budget of around $4,000. 

Using a vacancy rate of around 20% (which is probably a bit high but conservative) I get NOI of around $26,500. To be honest, I'm not sure what CAP rates are normal for the area but given an 8% CAP rate I get a valuation of around $332,000.

My questions are the following:

-Does that sound like a reasonable valuation based on the financial figures I provided? Would anyone change the assumptions (R&M/CapX allowance or vacancy rate)

-I might be interested in wholesaling this deal. If anyone has any advice on what would be the best way to advertise this contract I would really appreciate it. I feel I have this property under contact way below market value and if I can sell the contact I would consider this. The contract does allow for assignment by buyer. If anyone might be interest in a property like these feel free to contact me. 

Thanks and any input would be graciously accepted. 

Dan