IN COMMERCIAL PROPERTIES WHEN CALCULATING VALUE THE NUMBERS ARE IMPORTANT.HOW DO YOU CALCULATE NUMBERS AND COME UP WITH A VALUE WHEN PROPERTY IS ONLY SHOWING 65% OCCUPANCY OR LESS,NOT REALLY GIVING YOU POTENTIAL RENTAL AMOUNT.PLEASE HELP,THANK YOU
Your value of the building is (should be) based on what its doing today, not what it will do. As a negotiator, your posture and position is that the building isn’t worth any more than the current NOI dictates. Otherwise, you’re giving the seller your future equity (after improving the bottom line) not just what it’s worth today. In other words, you’re giving the seller what the property’s worth tomorrow, not today.
Meantime, you’re not a miracle worker as far as your position and negotiations. So whatever the building is pushing off, that’s it’s value. Except that… there is intrinsic value in the land, if not the structure. Rarely is there no value in the land, if not value in the structure,
Some buildings located in economically depressed areas simply are not good investments, because there really isn’t any upside income potential.
Meantime, if you don’t know the market rents, or aren’t bringing in some expertise, you don’t have any business attempting to negotiate a commercial property purchase. Knowing your numbers FIRST is 110% of the negotiating process.
Meantime, there’s a reason the building is nearly half empty. If it’s just a management issue, that’s one thing. If it’s a marketability issue that’s still another. Maybe it’s a combination of poor management and marketability. Actually any problem with the income is 110% a management problem, just saying. But you need to know not only what the upside is, but how to realize that potential.
Meantime, to determine the GSI, we just divide the current income by the number of occupied (paying) units and then multiply that result by the total number of units.
(I erased some text here that didn’t apply to the above).
Thank you very much for al the info,very helpful.
Thank you for your help. But I just want to clarify, is this applicable to all possible situations? What if I have a lower percentage?
It works using any percentage of occupancy.
To calculate the value of the real estate, the one thing that is important to know is: how much does the property make? While there are other factors to consider such as age and demographics, the amount of profit is the single most important aspect in determining value.
[b]This post is an excerpt from http://www.ehow.com/how_5806919_value-commercial-real-estate.html[/b]
I strongly agree with javipa on this one. I’m a broker for Marcus & Millichap and we lead the Nation on multi-family sales so I have some back ground in this area. We are experiencing high activity even in depressed areas, but the numbers do matter. And for the seller, at the end of the day the seller has to willing to get real and meet the market and detatch themself from the property.
I may be able to help you a lot further…