The discounted cash flow model would be most approprate to determine the value of this property.

Rob

Hello Desmond,

1. Good points by person before me on values being different based on what your ultimate use of the property will be. But I'll approach an answer with the asumption you want the property for its present use and cash flow. By asking the "approximate value", are you really trying to decide how much you should offer to buy this "income-producing" property?

As it sounds like you know, the property you describe here with the SF stats and its location, etc., is 1043 Farmington Avenue and is listed for sale right now at $795,000.

2. If so (i.e. on deciding what you feel is an appropriate purchase price for you), I think you might want to start with determining an adequate cap rate (ultimately, a percentage return) you want to realize (or what other properties have sold for recently). Both an accountant and your Realtor can help you with this.

3. Many who invest in real estate via income-producing properties need to have a method to determine the value of a property they're considering buying. By using other properties' operating income and recent sold prices, the capitalization rate is determined and then applied to the property in question to determine current value based on income.

4. Example: Divide the net operating income of a similar income producing property by the sale price to get the cap rate. Example: Let's say the recent sold price of a nearby income property was $550,000. And let's say that other property generated $70,000 in net income to the owners (again, not "gross" income, but "operating" income). $60,000 / $550,000 = .109 or 10.9% (The Capitalization Rate).

5. If that seems like a fair return for you, then you can determine an offer price on any similar income producing like property. You already have some of the income data for this property, I assume. I see the "gross income" on the MLS (i.e. the amount the apartment rents for and the amount the office tenants pay (or paid, if now currently vacant) for the medical office ($25 per SF). Ask for the expenses (to determine "operating" income), and ask for the lease terms for the existing tenants. Divide the operating income by the cap rate you want to achieve and you work your way into the price you should be willing to pay. Example: Let's say you find a property throwing off $85,000 in operating income and 11% is the cap rate or return you want to achieve: $85,000 / 11% = $772,775.

6. It's always good to have an accountant run some numbers for you. And be sure you either have (or get) a Realtor who will be a good Buyer's Agent for you. And now for my Realtor advertising plug: someone like me ;-)

Good luck in whatever you happen to do, Desmond!

I am familiar with the property you're referring to. The value depends on what you're intending to use it for. If you keep it the way it is - a medical office and one apartment - the value would be one thing versus converting it to two apartments or converting it all to office space if it's allowable.

First, check with WH to make sure you can what you want with the property, if you want to change the use at all. Then, I'd hire an appraiser.