Ok let me give you guys a little more info. The property I’m looking at looks like a residential property. It is a vacant boarded up house that use to have a dentist office on the first floor and had 2 apartments one on the second and another on the third floor. The realtor has it listed for $75,000 which seems a bit high because the house needs a lot of repairs. I’m guessing the reason it’s listed as a commercial property is because it use to be a dentist office at one point. Know, do i still approach getting the comps the same way as a residential or not?? If not how can i compare this to other commercial properties since this the odds of finding something similar around the area is very slim. Thanks again for any help.
Howdy FSID:
I would say you need to figure out how the demand in the area and decide if office space is need or rental apts and focus on one or the other. Also the higher and better use could be a Walgreens or perhaps two or three parcels put together and build a strip center. Land value and the cost to remove the structure may be your only concerns here. Decide what you want to do with the property and then get rent comps and see if the numbers work. If it will cost another $75,000 to rehab into a 4 plex and you can only get $800 in rent total it will not be a good deal. On the other hand if you can get $2000 rent as a office building you may want to make an offer. Commercial will generally take longer to rent.
Like you said you will have a hard time getting comps with a dentist office and 3 apts but as just one use or the other you should be able to get plenty of comps.
fsid,
I agree w/tedjr
However, I’d make sure the structure was sound before moving forward in any direction.
Spend a couple hundred on an inspector befor you spend 75k
fsid - I don’t know how far you have proceeded with the property since the holiday season. In the commercial world, a property that has living quarters and any type of office, retail or other commercial use is referred to as a ‘mixed-use’ property.
Mixed use properties are classified by lenders as commercial properties. You can get 80/10, 75/15, or 70/20 financing, in other words 90% financing, on a property like this (depending on your FICO), fully amortized to 30 years (you determine the length of the loan you want). Lenders always like properties that have residents in them.
With regard to how you compare this to other properties - you will need to compare to other mixed use properties. A commercial appraiser would find other properties that have the same mix of units that your prospect has - i.e. # of apartments, commercial use, etc.
What are sources of information for YOU to check out?? Step 1- drive the area and get the addresses of similar businesses/facilities to your prospect. Step 2 - Get online with your county tax assessor office and search through the property tax records for information on the similar properties that you found. Step 3 - meet with a local title company to review historical data concerning sales of similar properties in the past 24 months. You will have done 3 of 5 steps that a commercial appraiser will have done in evaluating the value of the property. You can then make a more informed decision about whether to proceed to discuss your purchase with a commercial mortgage lender and get an idea of the next steps to take.
Best regards.