All Forum Posts by: Oscar Pinto

As an agent I send mailers to 2-4 unit home owners , 2500 6X11 post cards every other month, attempting to get listings. I just started adding "Ask about our property management services".

Sending mailers for only property management does not make financial sense in our market, so piggybacking on a just list /sold mailer may work. 

@Jeff Greenberg You are right, I forgot TI allowance! Depending on the condition (shell, improved, etc.) I would give Tenant Improvement allowance in the form of free rent. In my market place it is not unheard of to give 1 month free per year. So that will deduct another $30,000 from the offer price. Also, i wasn't clear, i am deducting the holding cost from the perceived value. Again the cap rate and other information is gathered from comparables in the area. 

@Dovid Staples Holding cost = how long it will take to lease (absorption). OH! and i forgot to say you need to add NNN to the holding costs too.

I put in offers on properties every week, its part of the job of investing. My advice is to find a way to stream line your offer submitting process. That way you can see a property, run numbers, and submit an offer quickly. 

Here is how I would do it. First find out the follow. I am going to say your 3-unit is 3000 SF (1,000 SF per unit)

1. rent comps in the area. example $2.00/sf/month + NNN

2. absorption rate (how long it takes to rent a space), example 4-6 months

3. vacancy factor, example 10%.

4. commission, 6% of 5-year lease value.

Next, I'd  calculate gross, then adjusted gross, then using the area cap rate I can determine value.

gross: $2 x 3000 x 12 = $72,000/yr

adjust = gross - vacancy (10%) = $64,800.

example area cap rate of 5%. You can determine this by analyzing comps and see what retail is trading for in that area.

pro forma value = $1,296,000.

now the fun part, SUBTRACT holding cost (absorption rate) & commissions.

holding cost on a 5 month average = $30,000

commission = 72,000 x 5 x .06 = $21,600.

Final calculation: $1,244,400.

so you have the calculation and now you can put this in an excel sheet and make your life a bit eaiser.

I hope this helped.