We own a historic Flatiron building in upstate NY and we are trying to find comparable pricing on similar

Asked by Lynn Thirion, Watkins Glen, NY Tue Jun 3, 2008

buildings and are having a difficult time. The building was built in 1840, is 3 stories, has 6 apartments on the upper two floors for income and an Art/Glass gallery on the first floor. Any ideas for starting price?

Help the community by answering this question:

+ web reference
Web reference:

Answers

10
Vivian "Vick…, Agent, Elmira, NY
Thu Jun 5, 2008
Joanne Lane gave you the best answer....and I would add the following; as your building sounds like a mix of residential and commercial it will be your cash flow from the building that will help to determine your highest and best price. I would recommend you find a good commercial appraiser in your area and pay to have an appraisal done before placing your property on the market. If there is not a building in the area that compares to yours an appraiser will have access to solds of similar buildings in upstate NY, and will advise you on how to price the property for your location. Also, LoopNet is a good commercial site, however you would need to be a Realtor to place your listing for sale on that site. If you decide to list your property with an agent you might want to ask if they have a LoopNet account. Good Luck!
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
Hi,
Good question. I just sold an 1830s mixed use building that sounds very similar to this. It attracted interest from a variety of folks from many walks of life, with wildly differing opinions as to value. This can be disconcerting unless you have confidence in your pricing. Here's a couple of ways to look at it that might help you, none of which is intended to substitute for proper professional advice from a qualified commercial appraiser, which would be money well spent.

First, ask a Commercial Broker for a price opinion using sales data. Since there aren't any recent comps in the immediate vicinity, you cast the net wider, then make adjustments for the variables. The key factors you would be looking to match are historic/landmark status, building/lot size, zoning, and foot traffic, then make adjustments for location.

Second, interested investors may evaluate the property based purely on how much income it makes, without even walking through the door. These folks are using the income approach to value and want to know what size of bank loan they can secure using the current income derived from rents, as well how much profit the building makes per year after paying all the expenses. Spreadsheets should include a comp for market rent on the art/glass gallery, as I imagine you haven't actually been paying any, but the buyer will want to know how much rent it could achieve in today's market.

In addition to the broker's expertise, someone else who could be very helpful is the commercial lending officer in your local bank. You could complete a commercial loan application as if you were buying the building from yourself, then ask the loan officer how much the bank might be willing to lend a buyer assuming the applicant is qualified in all other respects.

As a rough rule of thumb, you could treat the $ value of the potential loan as 70%-75% of the price someone might be willing to pay for the property, given the 30%-25% balance of cash banks like to see from a buyer for this type of project, at least the ones around here.

You could also run a second set of numbers using projected B&B income rather than current income to see how much difference it could make to the Profit & Loss. This will also need to factor in the cost of servicing an additional loan to make any structural changes necessary for the conversion to B&B. .

However, bear in mind that if you ask someone to pay more because of potential gains, rather than realized gains, they have no leverage with the bank for that part of it. Hence you can only expect to achieve ambitious pricing if a highly qualified buyer with deep pockets can be convinced to buy into a dream, either the one that you are walking away from, or their own version. That's a tough sell, but it does happen and the great thing about a building like this, is that it's uniqueness will attract a lot of interest.

Good Luck!
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
Hi,
Good question. I just sold an 1830s mixed use building that sounds very similar to this. It attracted interest from a variety of folks from many walks of life, with wildly differing opinions as to value. This can be disconcerting unless you have confidence in your pricing. There are a couple of things you can do to help yourself arrive at that position and my suggestion is to do both, then see where you are.

First, ask a Commercial Broker for a price opinion using sales data. Since there aren't any recent comps in the immediate vicinity, you cast the net wider and go back further in time, then make adjustments for the variables. The factors you would be looking to match are age of building and any landmark status, size, zoning, and foot traffic, then make adjustments for geographical proximity and recency of sale.

Second, interested investors will want to know exactly how much income the property makes, and may reject the property based purely on the data you provide for them, without even walking through the door. These folks are using the income approach to value, meaning the value of the building to them is determined by what size of bank loan can be secured using the income derived from rents. They may ask for 3 to 5 years of spreadsheets. In addition to the commercial broker, someone who could be very helpful in helping you work this through and produce the financial information would be the commercial lending officer in your local bank. Complete the commercial loan application as if you were buying the building from yourself, then ask the loan officer how much the bank might be willing to lend a buyer assuming the applicant is qualified in all other respects.

As a rough rule of thumb, you could treat the $ value of the potential loan as 75% of the capital value of the building, since banks like see at least 25% equity invested by the buyer in this type of project, and preferably 30%, at least that's the situation around here.

You could also run a second set of numbers using projected B&B income rather than current income to see how much it could increase the capital value. This will also need to factor in the cost of an additional loan to make any structural changes necessary for the conversion. This then helps you to determine the additional value of the building potential. However, if you do decide to price it ambitiously to include the potential aspects, bear in mind that the bank is unlikely to agree anything more that the most conservative numbers.

The difference between the potential bank loan and the asking price represents the amount of cash down the buyer is going to need. Put another way, when you ask someone to pay more because of potential gains, rather than realized gains, they have no leverage with the bank for that part of it. Hence you can only expect to achieve ambitious pricing if a highly qualified buyer with deep pockets can be convinced to buy into a dream, either the one that you are walking away from, or their own version. That's a tough sell.

None of the above is intended to substitute for a proper appraisal by a qualified appraiser., which would be money well spent.
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
Hi,
Good question. I just sold an 1830s mixed use building that sounds very similar to this. It attracted interest from a variety of folks from many walks of life, with wildly differing opinions as to value. This can be disconcerting unless you have confidence in your pricing. There are a couple of things you can do to help yourself arrive at that position and my suggestion is to do both, then see where you are.

First, ask a Commercial Broker for a price opinion using sales data. Since there aren't any recent comps in the immediate vicinity, you cast the net wider and go back further in time, then make adjustments for the variables. The factors you would be looking to match are age of building and any landmark status, size, zoning, and foot traffic, then make adjustments for geographical proximity and recency of sale.

Second, interested investors will want to know exactly how much income the property makes, and may reject the property based purely on the data you provide for them, without even walking through the door. These folks are using the income approach to value, meaning the value of the building to them is determined by what size of bank loan can be secured using the income derived from rents. They may ask for 3 to 5 years of spreadsheets. In addition to the commercial broker, someone who could be very helpful in helping you work this through and produce the financial information would be the commercial lending officer in your local bank. Complete the commercial loan application as if you were buying the building from yourself, then ask the loan officer how much the bank might be willing to lend a buyer assuming the applicant is qualified in all other respects. As a rough rule of thumb, you could treat the $ value of the potential loan as 75% of the capital value of the building, since banks like see at least 25% equity invested by the buyer in this type of project, and preferably 30%, at least that's the situation around here.

You could also run a second set of numbers using projected B&B income rather than current income to see how much it could increase the capital value. This will also need to factor in the cost of an additional loan to make any structural changes necessary for the conversion. This then helps you to determine the value of the buildings future potential. However, if you do decide to price it ambitiously to take into account the added value, bear in mind that the bank is likely to use the more conservative numbers.

The difference between the potential bank loan and the asking price represents the amount of cash down the buyer is going to need. Put another way, when you ask someone to pay more because of potential gains, rather than realized gains, the buyer has no leverage with the bank for that part of it, hence you can only expect to achieve the more ambitious pricing if a highly qualified buyer with deep pockets can be convinced to buy into your dreams.

None of the above is intended to substitute for a proper appraisal by a
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
Hi,
Good question. I just sold an 1830s mixed use building that sounds very similar to this. It attracted interest from a variety of folks from many walks of life, with wildly differing opinions as to value. This can be disconcerting unless you have confidence in your pricing. There are a few things you can do to help yourself arrive at that position and my suggestion is to do both, then see where you are.

First, ask a Commercial Broker for a price opinion using sales data. Since there aren't any recent comps in the immediate vicinity, you cast the net wider and go back further in time, then make adjustments for the variables. The factors you would be looking to match are age of building and any landmark status, size, zoning, and foot traffic, then make adjustments for geographical proximity and recency of sale.

Second, interested investors will want to know exactly how much income the property makes, and may reject the property based purely on the data you provide for them, without even walking through the door. These folks are using the income approach to value, meaning the value of the building to them is determined by what size of bank loan can be secured using the income derived from rents. They may ask for 3 to 5 years of spreadsheets. In addition to the commercial broker, someone who could be very helpful in helping you work this through and produce the financial information would be the commercial lending officer in your local bank. Complete the commercial loan application as if you were buying the building from yourself, then ask the loan officer how much the bank might be willing to lend a buyer assuming the applicant is qualified in all other respects. As a rough rule of thumb, you could treat the $ value of the potential loan as 75% of the capital value of the building, since banks like see at least 25% equity invested by the buyer in this type of project, and preferably 30%, at least that's the situation around here.

You could also run a second set of numbers using projected B&B income rather than current income to see how much it could increase the capital value. This will also need to factor in the cost of an additional loan to make any structural changes necessary for the conversion. This then helps you to determine the value of the buildings future potential. However, if you do decide to price it ambitiously to take into account the added value, bear in mind that the bank is likely to use the more conservative numbers.

The difference between the potential bank loan and the asking price represents the amount of cash down the buyer is going to need. Put another way, when you ask someone to pay more because of potential gains, rather than realized gains, the buyer has no leverage with the bank for that part of it, hence you can only expect to achieve the more ambitious pricing if a highly qualified buyer with deep pockets can be convinced to buy into your dreams.

None of the above is intended to substitute for a proper appraisal by a qualified commercial appraiser, which would be money well spent.
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
Hi,
I just sold an 1830s mixed use building that sounds very similar to this. It attracted interest from a folks with wildly differing opinions as to value. This can be disconcerting unless you are confident with your pricing. There are two things you can do to arrive at that number and my suggestion is to do both, then see where you are.

First, ask a Commercial Broker for a price opinion using sales data. Since there aren't any recent comps in the immediate vicinity, you cast the net wider and go back further in time, then make adjustments for the variables. The factors you are looking to match are similar age, size, zoning, and foot traffic, then make the adjustments for geographical proximity and recency of sale. Second, investors are going to want to know how much income the property makes, and may reject the property based on that data without even walking through the door. These folks are using the income approach to value, meaning the value of the building to them is determined by what size of loan can be secured using the income derived from rents. Potential investors may ask for 3 to 5 years of spreadsheets. In addition to the commercial broker, someone who could be very helpful in helping you work this through would be the commercial lending officer in your local bank. If you fill out all the building details in their commercial loan application as if you were buying the building from yourself, then ask the loan officer how much the bank might be willing to lend a buyer. As a rough rule of thumb, you could then treat the loan as 75% of the value, since banks like see at least 25% equity invested by the buyer in a commercial project, and preferably 30%, at least that's the situation around here. For your financial projections you could use the projected B&B income if it would increase the capitalized value, although the bank is likely to take the more conservative numbers of present income into its calculations.

None of the above is intended to substitute for a proper appraisal by a qualified commercial appraiser, which would be money well spent.
0 votes
joanna lane, Agent, Cutchogue, NY
Thu Jun 5, 2008
I am not surprised by your difficulty. Because of its historic nature, this building is likely to attract an eclectic mix of interest from the whole spectrum of the human population, with an equally wide range of business expertise, expectations, ability to pay, and wildly differing opinions as to value. This can become very disconcerting over a period of time unless you start off on solid ground with your pricing. I just sold an 1830s mixed use building that sounds very similar to this. There are two approaches you can take to tackle this and my recommendation is to do both, then see where you are.

First, ask a Commercial Broker for a price opinion using recent sales data. There simply aren't any recent comps in the immediate vicinity, so you can forget the usual narrow geographical radius and time frame. What you are looking for is similar building type and volume of foot traffic, rather than getting hung up on a narrow geographical radius and time period of the last few months. An experienced broker will take the data and make adjustments to compensate for those factors.

Second, the first question most investors are going to ask when they walk through the door is how much income does the property make. These folks are using the income approach to value, meaning the value of the building to them is based on how much they can borrow from the bank based on the income derived from rents, which is needed to pay the note. They want to see 3 to 5 years of spreadsheets. So my suggestion to you would be to ask the commercial lending officer in your bank for a copy of their commercial application form, then complete it as if you were buying the building from yourself. The loan officer would then be able to tell you how much the bank would likely be able to lend a buyer. As a rough rule of thumb, you could then treat that as 75% of the value, since banks would want to see at least 25% equity invested by the buyer in a commercial project, and preferably 30%, at least around here.

None of the above is intended to substitute for a proper appraisal by a qualified commercial appraiser. Frankly, I think that would be money well spent, as has been suggested below. This additional information is simply intended to help you understand the practical side of selling a mixed use building, because at the end of the day, the chances are the buyer is going to need a loan, and if the income is insufficient to pay a note for 70% to 75% of your asking price, then someone who may absolutely love the building and be willing to offer the moon, would either not be able to close, or would in the end walk away from the deal. So it's a good idea to know that number as soon as possible. And you can certainly use the projected B&B income if it would increase the value, although the bank is likely to take the more conservative numbers of present income into its calculations.
0 votes
Lynn Thirion, , Watkins Glen, NY
Wed Jun 4, 2008
Yes we are going to list the property and the condition is very good. My husband and I did all of the lower level renovations to the gallery and are the owner/operators of the glass gallery/studio. All 6 of the apartments are fully occupied or could be converted to lodging as we live in a lake community where B & B's do extremely well. The building has enormous potential!!
We purchased it for investment 7 years ago & my husband is now looking for less overhead.
0 votes
Thomas McGiv…, Agent, Farmingville, NY
Wed Jun 4, 2008
Lynn,

Where are you going to advertise it? Why are you selling it? Was it family-owned? What is the overall condition? Check out http://www.loopnet.com see if that turns up anything.
Web Reference:  http://www.tommcgiveron.com
0 votes
Gail Gladsto…, Agent, 11743, NY
Tue Jun 3, 2008
Contact a commercial broker in your area for assistance or hire a commercial appraiser.
Web Reference:  http://GailGladstone.com
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more