Advice for determining cost on a commercial property

[Jonathon Atherholt]

Hello all, I have a few residential properties, and I’m about to branch out to my first commercial property. I have run into a couple properties now that are less than fully leased, but the owners have listed the price as if it were fully leased. I understand how to determine the NOI and apply the CAP rate to determine current actual cost, but I’m asking advice for the grey area. The last property I analyzed had an NOI very close to zero because it’s less than half rented, however the owner had listed it as if it was fully leased. Obviously I’m not willing to pay that full price, but it’s hard to argue that by the formula of NOI and CAP rate, the property is really worth $0. These are the ideal properties, right? Because they have significant value to add just by leasing out the rest of the building, which buys you more equity to use later. But the question is, what is reasonable to offer to the seller in this situation? What offer do you make between free and full price? Thanks in advance, Jonathon