How to price a shop?

[gingerdad]

simpleish question, we lease a retail shop, we've been given the option to buy it and i'm trying to figure out how to value it. We are meeting with our accountants etc. But just wonder is there any simple way in valuing the property. Multiple of rent or something

 

[Annoying Donkey]

Get three estate agent quotes.

 

[Blaby Loyal]

Dependent on age, condition etc. I'd be inclined to get a more detailed building report (e.g. ARICS-based) to make sure you're not just taking on someone else's problem(s).

At least you'll know if the tenant is any good or not!

 

[Socio South West]

Commercial property prices are fairly well established per sq foot/ sq metre in all areas: Ask a local commercial property surveyor or agent (as opposed to an estate agent)

Then factor in a surveyor's building condition report to get to a price.

 

[BristolBiz]

I was in a similar position 10 years ago. The market was booming & stupid money was being thrown about. I paid as little as I could, the vendor wouldn't sell for less.

I paid more than it's worth now, but it's still one of the best decisions I've made.

You are in a strong position to negotiate hard, and the ultimate buying price is down to negotiation, commercial property is less attractive a proposition than it was, empty shops don't generate income!

You should talk to an accountant before going ahead, he will (should) recommend the best way to own the shop - there are all sorts of tax implications,

 

[Talay]

As interest rates rise, commercial property goes in reverse, as it is essentially a fixed income asset in simplistic terms. And interest rates are not going to fall anytime soon are they ?

I am in a similar position but where we are the tenant.

If for instance, you thought that 6% return was a good figure and the rent on the shop was £10k per annum then a ballpark valuation would be £10k / 6% = £167k. Change the numbers to suit your property.

 

[gingerdad]

thanks for the replys -

we know the issues with the building and possible costs in the short term which we would factor into any offer. to me it seems logical if we can buy it as we are paying rent anyway we might as well be our own landlord. have a commerical agent coming round and also meeting with our accountants as there are options as to how we fund any purhcase wether we do it from cash or borrow the money.

should add the current owners are retiered and spending more time abroad so think they don't want the hassle of dealing with some issues. but we can use that to our advantage

 

[davidlee21]

It Depends on the location, floor, age, condition, and various other factors. You need to consult estate agents.

 

[BristolBiz]

Have they indicated an asking price?, that's a good starting point.

Everything after that is a negotiation.

When we borrowed to buy our shop, I asked the lender how much they thought the property was worth & the answer was "whatever you are prepared to pay for it"

 

[Justin Smith]

Shops really aren't worth as much these days, I`d have thought this is very much a buyers market. But does the shop have flats over it ? That changes the business proposition markedly because they'll probably be much more easily rented out, which increases the value of the shop but also the income you`d get from it.
When I was considering the pros and cons of shutting down my business I more or less assumed I wouldn`t be able to rent out the shop (I own it), after all there are so many empty shops about. That said my shop is quite big and next to two fairly busy bus stops (one in each direction) so maybe I could rent it out though it might take quite a long time to get a tenant. Fortunately for me my shop has two flats over it !

 

[gingerdad]

Have they indicated an asking price?, that's a good starting point.

Everything after that is a negotiation.

When we borrowed to buy our shop, I asked the lender how much they thought the property was worth & the answer was "whatever you are prepared to pay for it"

No they haven't - and I agree its what we're prepared to pay for it but to have some evidence how i've come up with the price

 

[gingerdad]

Shops really aren't worth as much these days, I`d have thought this is very much a buyers market. But does the shop have flats over it ? That changes the business proposition markedly because they'll probably be much more easily rented out, which increases the value of the shop but also the income you`d get from it.
When I was considering the pros and cons of shutting down my business I more or less assumed I wouldn`t be able to rent out the shop (I own it), after all there are so many empty shops about. That said my shop is quite big and next to two fairly busy bus stops (one in each direction) so maybe I could rent it out though it might take quite a long time to get a tenant. Fortunately for me my shop has two flats over it !

No empty shops in the village that we're in - its only the ground floor we'd be buying and 1/4 of the freehold. and we have a good tenant us....

 

[DontAsk]

It Depends on the location, floor,

Do you pay more for Amtico, or something? Less if there's a body under it?

 

[Financial-Modeller]

Remember that the investment value of a shop is partly dependent on the tenant.

The value to the vendor of selling a shop with a creditworthy tenant is different (more usually) than the vendor selling an empty shop that the buyer will have to either occupy or market to find a suitable tenant to lease it to, so your actions have an impact on the value that the vendor will receive if you don't buy it.

 

[GTL]

i wouldn't be in a rush to buy it; what with everything political/economic going o at the moment.

 

[Chris Ashdown]

Have you looked at the councils long term planning for the area as well as any other plans that may effect your area, so my advice have a word with the planning office before you even consider going further

 

[gingerdad]

Remember that the investment value of a shop is partly dependent on the tenant.

The value to the vendor of selling a shop with a creditworthy tenant is different (more usually) than the vendor selling an empty shop that the buyer will have to either occupy or market to find a suitable tenant to lease it to, so your actions have an impact on the value that the vendor will receive if you don't buy it.

Hopefully the tenant is credit worth and planning on staying there for the foreseeable future - its us

Have you looked at the councils long term planning for the area as well as any other plans that may effect your area, so my advice have a word with the planning office before you even consider going further

Looked into that, nothing planned to change - its a small town, all shops are full and it's a touristy area.

 

[gingerdad]

three businesses changed hands on retierment recently all sold very quickly. one shop was becoming vacant but was let before it came onto the market, its fairly bouyent area even with currnet national shitstorm