How to Evaluate the Market Value of a Commercial Property

[Stephen Brown]

Hello BP.

My father and I are interested in purchasing a little car wash that has been vacant for years and is now in the foreclosure process and will be up for auction here soon by the county. I know that commercial real estate is valued based on the cap rate and I want to create a pro-forma to evaluate this but I'm not sure how to start. I was wondering how I would go about valuing this property so that I don't overbid at the auction, and the only thing that comes to my mind is to contact other car washes in the area to see their operating performances. I'd like to hear if anyone has  bought a property like this before and how they ended up valuing the property's worth.

The current county appraised value is $156,000

Thanks,

Stephen Brown