Calculating Asking Price on Commercial Property

[Vincent Pollitto]

Just locked up a deal on a commercial warehouse, and we're looking to wholesale the property. We acquired the property at a great price, we now want to make sure we have a fair and calculated asking price for when we disposition the property.

The warehouse is 11800 sqft, and is split into warehouse space and office space. There are 6 offices, a kitchen, and two bathrooms. Taxes are 16k a year.

I see warehouse space located in the same area available on loopnet for no less than $5 SF/ year. Office space for no less than $10 SF/ year.

If the entire warehouse rents conservatively at $6.50 SF/ yr the gross rents would be $76,700. Maintenance + insurance would be a combined 12k per year.

Cap rate = 10%

NOI = 77k - 16k(taxes)- 12k(Maint.+Insurance) = 49,000

Property Value = $490,000

Is 490,000 a fair asking price for something of this nature?

[Drew Petro]

My 2 cents ... if you plan to sell to an investor, you will need to find a tenant to place there first on a long-term lease (with personal guarantee). If you are trying to sell directly to a business owner, it may sit on the market for longer. 

To justify a $490k valuation using rent as the income, and a 10-cap, you can work backwards. NOI of $49k, if you do a triple net lease, expenses should be low, so 75%-80% NOI of gross? $49k NOI at 75% = gross of $66k, thus rent of $5,500 per month. Is that reasonable for your area?