Question. My wife is a realtor, and has an 8 unit commercial property. This is her first commercial property, and she is having a hard time marketing it. She has pulled the duplex owners in the area and sent them the flyer with the property, and has it listed on craigslist…but other than that, what would your suggestion be in marketing it? It is listed at the appraised value in '05, and is a great deal (fully rented), but other than her site and the above she is at a loss on marketing tips. Suggestions?
A duplex and an 8 unit are different worlds completely in terms of price range, financing, etc. Why not pull the owners of the 5+ unit buildings in town and mail them instead. Often duplex owners are part time investors, owner occupied, etc. You want to find the true investors. Also try passing out information at a local real estate investors meeting and marketing it on Loopnet.com and Costar.com. Also, in this ever changing market a 2 yr old appraisal is about as good as toilet paper unless your selling to an unknowing person.
Ps- What are the numbers? How much is it listed for and what are the gross rents?
The gross rents are $4400 for all units, and it’s just been dropped to $360k. All units except for 1 have been remodeled, I believe. It only really needs siding. As of 9-6-07, all units were fully rented.
what market is it located?
NE Ohio (east of Cleveland near the lake)
Of course she’s having a hard time. Commercial units are valued on income, not on comps. Only the bank will care about appraisals at loan time.
This should put her in the ballpark:
Gross rent: $52800 ($4400 x 12) Vacancy: [u] 1584 [/u] (assumed 3%) Effective Gross Income: $51216
Total Operating Expenses: $ 23047 (Assumed 45% of EGI)
Net Operating Income: $ 28169 (Income – Expenses)
Value = NOI/Cap Rate = $28169/ 8% = $352K (Assumed an 8% Cap rate)
From my estimate, her price might be ok. I obviously assumed various numbers though, that she should change based on actuals. I’m an investor and, as much as I hate to suggest this, she could market the property with pro-forma values (market estimates, if she knows what they are).
She must research prevailing cap rates for the area. I’m really guessing at 8%, which would usually be an appealing number for an investor. Higher is better, if she wants to sell quickly. Loopnet is a good place to research prevailing cap rates in the area and the very best place to list a property like this, in my opinion. She’ll get huge coverage.