Commercial real estate investment

[Leander Sheppard]

i have a commercial property in rochester,ny built in 1940. If it need close to 80,000 in repairs how can i find out what to sell it for? Need suggestions

[John Wijtenburg]

This is a very ambiguous question, but I'll take the challenge.

Commercial properties are valued very similarly to rental homes. Value of the property is composed of intrinsic property value and the value based on cash flow.

How much you invest in the property and how much you sell it for are related but separate. They're related in that the repairs will increase property value, and if you do it right, that increase will be greater than the amount you invested in improvements. However, the market will set the sale price, and the market doesn't really care how much you invested in to the deal.

You'll need two things for determining sale price - a market survey of recent sales and an operating pro forma. The market survey will give you price per sq. ft. and cap rates. You can then apply the market average cap rate to the operating proforma for the cash flow value.

I would recommend engaging a broker to do a lot of this work for you. They'll usually do it for free in a broker opinion of value (BOV) or broker price opinion (BPO). This is a service to show off their quality of work in an effort to win your business.