Jun 10
17

How to Value Commercial Real Estate

5 Comments

by Julie Broad

As a residential real estate investor, when I try to figure out what a house is worth I basically look at what similar houses in the area have sold for recently. When I think about how I can add value to a home, I look at the features and amenities other homes in the area have that people are paying more for. How much more does a home with granite kitchen counter tops sell for? What about a home with a beautifully landscaped yard or a fresh coat of paint on the exterior? This is called looking at comparables.

When investing in commercial real estate, you’ll use comparables as well, but valuing commercial real estate is much more focused on the income a property can generate. In this video I explain the three most common ways to value commercial real estate.

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This entry was posted on June 17, 2010 at 6:36 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Posted in Commercial Real Estate Real Estate Investing Real Estate Investing Video Tips by Rev N You 5 Comments

5 Responses to "How to Value Commercial Real Estate"

  • Rick says:
    June 20, 2010 at 3:19 am

    Julie, I think you did a really good job of explaining three pretty complex things in such a short video.

    [Reply]

  • Julie Broad says:
    June 27, 2010 at 12:47 am

    Thanks Dad!! :)
    Julie Broad´s last [type] ..What’s Pushing You Up That Hill

    [Reply]

  • Jo Amick says:
    September 25, 2011 at 12:20 pm

    This is an excellent video. One thing I love about commercial real estate like you mentioned is that the value is based off income the property generates. Thanks for sharing!

    [Reply]

  • Matthew Tynan says:
    December 19, 2011 at 1:34 am

    Hi Dave & Julie,
    that was amazing.
    I had no idea one could actually ‘read’ the market cycles.

    I am making an offer on Tuesday on a property that is undervalued due to poor management. Similar C. Properties in my market area are renting for $14, $15 & $16
    dollars a sqf. this one is 1500 sqf commercial & has two residential units above it.
    1 one bdrm $600 & 1 two bdrm $790 (vacant).
    Listed at 359,000 and has so far rejected one offer for 330,000.

    Property owner is the seller. He wants to stay for 9 years. And is willing to pay going rental rate which he thinks is $10 – $12 sqf. Yet he admits he doesn’t really know what the rents are.

    Expenses are $17,481 this includes $9,668 mortgage on 350,000. but not including the second mortgage of $122,500 which is my %35 down.

    Hope this makes sense.

    Matthew

    [Reply]

    Matthew Tynan Reply:
    December 19th, 2011 at 5:03 pm

    Hi Dave,
    Here are the numbers.
    I think (hope) this has a good cash flow . .

    NOI = $26,635.

    Based on an income of $39,300 – Vacancy of %5 $1965 – Operating costs $10,700.

    The above is assuming that each lease holder pays their own hydro.
    Commercial tenant pay half of $5,000 tax.

    Gas – $2,700 (only one meter at present)
    Plow – $500 ( shared payment with commercial tenant)
    Water -$1,700 (one meter)
    Hydro -$1,800 ( common area)
    Tax – $2,500 (Commercial tenant paying other half)
    Insur – $1,500

    [Reply]

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