Determine ARV on Commercial BRRRR??

[Matthew John]

Hey guys, 

I'm in the process of evaluating a 4 unit Commercial Medical/Office building. This is a distressed property that is certainly below it's top potential. 

Currently it only has 2/4 units rented and has not had any updates since the 1980s. It was built in 1967. 

The previous owner bought it for $505,000 back in 2006 and it doesn't appear he did much maintenance or management of the building. Right now it's sitting in Pre-Foreclosure and he needs out. Seller seems motivated as he's moving to California, but he's looking for a CASH OFFER ONLY. 

My experience thus far has been only residential, but I came across this property and it looks like it could be a deal. Being that it's a 4 unit and relatively small, I think this would be a great step for me as an investor. 

The problem I'm having is determining the ARV of the property. It's certainly not as easy as residential.

I'm looking to submit a Cash Offer then go over the numbers with my interested Cash Investors & at the local REIA next week.

Listing Price - 299,900

Rehab Estimates - 100,000

Rent Comps - $12/sq ft - $20/sqft (varies a LOT)

Current Income - $2100/m

Offer price - 250k Cash, no higher than 285k

Taxes - ~$7000/yr

Utilities - Tenants Pay

I have comped out similar properties with my agent and we're finding some are SMALLER, but priced higher. Some are BIGGER, but priced lower. 

I understand commercial properties are appraised with the income they are producing, but I'm also having difficulties projecting that. 

On the Brokers listing, he advertises it as "5000 rentable sq ft".

On the municipality website, it says "4508 total sq/ft"

On Reonomy, it says the "Building Area is 3556 sq ft".

These are some significant fluctuations that could definitely impact the ARV of the property and I'm not sure which is accurate.

If order for this deal to 'make sense', the ARV would have to come in over 500k. I know it *could* be worth more than that, because 13 years ago when the owner bought it through a bank loan, it was appraised for 505k.

How do you guys accurately determine the ARV on a Commercial property?

Before I submit an offer and move forward with an inspection, sending a contractor out there to confirm rehab estimates, and tie up this property, I want to make sure it actually could be a deal. 

Thanks!