gregorygarver.com

[niles9530]

How does one go about assessing the value of a piece of commercial property? the key point is "location, location, location", yes, the building is in a pretty good location in a older neighborhood where not many transactions per year. also, the seller does not have use a real estate agent. i used the formula (rental price / square feet)*(actual area)*(25 years of mortgage payment) trying to determine what would be the good starting point for me to bargain. anybody got other good ideas?

[Gem]

In the US commerical mortgages are based on 15 years, not 25.And no, not good. You need to go to the country clerks office and find out what comparable properties have sold for in the past 6 months to a year at most. As for starting point for bargaining, the seller should set that, not you. You cannot know what the seller would need to get out of the building, so he has to be the one to set the price. You get to negotiate from there.

[iggy_688786]

I would say that the most common sense method would be to approximate what you can get financed by the following method.Take the estimated annual net income of the property after ALL expenses and multiply by 1.35 (safe to assume for office/retail/multifamily). Divide by 12 and this should be the maximum monthly mortgage payment that your property would support. To convert that to a loan amount, go to the following website http://ray.met.fsu.edu/cgi-bin/amortize and clear the selection for principal / enter 360 payments for a 30 year amortization or 300 for a 25 year / hit calculate button (this is assuming 8% interest rate you may want to change rate to 9.5% or so). Take the calculated principal and divide that by 80% (assuming you will put down 20%) to come up with a purchase price that you will not want to go above.Another figure that you will want to have in mind is that of the comparable sales in the last six months to year and find out what they are going for per square foot. If you have an appraiser in mind or one that you have worked with in the past, you may be able to have the appraiser look up some quick comps for you prior to sending him out to do the appraisal.All that being said, this is a negotiation and your best bet is to let the other side name the first price and then have some numbers on your side to haggle hard...