Possible deal, but my first commercial deal

[Patrick Gerrity]

Hey everyone!! So Ive been doing multi family buildings and some self storage partnering, however I’ve never really done anything commercial myself. I came across a private deal in my hometown that I am truly interested in. It is a commercial property that consists of 7 apartments upstairs, with three commercial spaces downstairs. All storefronts, with 2 large chain fast food restaurants and a tobacco shop. It is smack dab in the heart of the downtown area of the city, with a very large amount of 9-5 workers getting their lunches there. It is currently fully occupied. Right now any apartments in that area have a 1-2 year waiting list to get in. Yearly rental income is $170,000. Taxes are $22,000 a year, and the asking price is $1 million. The problem that I have is I don’t know what to offer on this deal. Like I said, I’ve never done commercial and I’m not sure how to valuation this property. Can anyone help or give me some opinions? Thanks!!

[Brian Schmelzlen]

Patrick, trust but verify. You are going to need to check and make sure all the numbers they are providing you are correct. Don’t only get the rent rolls for the past 12 months, but look at the actual deposits. Look at the expenses for the past 2-3 years to make sure they didn’t defer some maintenance to increase their NOI artificially for the sale.