All Forum Posts by: Dan Toomey

Hello!

I am relatively new to the real estate game and was hoping there might be a few commercial real estate folks out there willing to pass some knowledge onto a relative newbie. 

I recently purchased my first commercial property which is a 3,650 square foot medical building located in Sedro Woolley, WA. The building has two suites. The larger side is about 2,500 sq ft and is currently rented for $2,000 a month. This side has a three year lease which expires in 2020. The smaller side is about 1,100 sq ft and is currently vacant. 

The smaller side (currently vacant) has been recently updated and I feel I could get around $1,100. With this side occupied at $1,100, the building in total would gross $37,200 with net operating income of around $25,000. This NOI includes a R&M discount of $4,000 and a 6% vacancy discount, but does not include a management fee. Applying a 9% CAP rate to this building, I get an estimated value of around $280,000. I'm using a 9% CAP rate because the building was built in the 1950's.

I'm wondering if I would be better off trying to get the smaller side leased and then listing the property or if I should list the property with the smaller side vacant. If I can get both sides leased the building would be more attractive to an investor looking for cash flow. However, if I can find a buyer looking for a 1,100 sq ft office space the building would be more valuable with the smaller side vacant. 

Any advice or input on this would be greatly appreciated!

Thanks @Gary Jenson searching comps on the Skagit County website is incredibly helpful.

My agent pulled some comps before we made the offer but I can't find any comps because most of the sites are for residential. Do you know of any good sites to research commercial property sales?

Hello BiggerPockets community. I've been a long time listener to the podcast and recently took the dive into investing in commercial real estate. I recently got a commercial building under contract in Sedro-Woolley that is 3,650 square feet and is made up of two separate offices. The larger office has a long-term tenant and just got a new two year lease with an option to extend. The smaller office (around 1,000 square feet) is leased through July and the tenant will be moving out at that point. 

The gross rental income is $3,600 monthly. The building was built in the 1950's and just got a new flat roof put on last year. The tenant pay utilities so I'm guessing the taxes, insurance and repairs and maintenance allowance add up to around $8,000 annually with a R&M/CapX budget of around $4,000. 

Using a vacancy rate of around 20% (which is probably a bit high but conservative) I get NOI of around $26,500. To be honest, I'm not sure what CAP rates are normal for the area but given an 8% CAP rate I get a valuation of around $332,000.

My questions are the following:

-Does that sound like a reasonable valuation based on the financial figures I provided? Would anyone change the assumptions (R&M/CapX allowance or vacancy rate)

-I might be interested in wholesaling this deal. If anyone has any advice on what would be the best way to advertise this contract I would really appreciate it. I feel I have this property under contact way below market value and if I can sell the contact I would consider this. The contract does allow for assignment by buyer. If anyone might be interest in a property like these feel free to contact me. 

Thanks and any input would be graciously accepted. 

Dan