How to analyze a deal on a mixed used commercial property

[Matt McCue]

I've found a 24 unit mixed use apartment building for sale. 8 units are retail space, 8 units are 1 BR apartments and the remaining 8 are 2 BR apartments.  I am brand new to residential RE investing having only bought 2 six BR single family homes set up for student housing.  

I'd like to eventually graduate to apartment buildings and would like to use this opportunity to practice analyzing deals and see if this is a good one.  What questions and data should I gather from the commercial agent to start analyzing the deal?  I simply don't know where to start.  

The listing suggests there are opportunities to add value....from the listing: "features large 1 bedroom units (900 SF), which can easily be converted into 2 bedroom units. The 2 bedroom units currently average $1,425/month, while across the street rents are north of $2,000/month. The commercial (retail/office) space is 100% occupied by stable local and regional tenants at below-market rents."

[Rodolfo Canon]

Start by asking for the up-to-date rent rolls and the income statement (or use 30%) on the property. Calculate the net operating income.  Divide the net operating income by the capitalization rate you require to invest your funds. That's give you the value.

NOI = Capitalization Rate X Value, or, as the formula is more commonly known, "IRV." I = RV

I have an excellent spreadsheet that you can use that will calculate all these numbers for you. We use it every day in the Denver market to arrive at a beginning estimate of value. Send me a note if you would like to receive it from me (free of charge). Or you can go directly to the author, Joe Massey at Castle and Cooke Mortgage