Calculating a sale price for property

S

San Martino

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Hi,

I've been approached by a tenant to buy a property that they rent from me in a Dublin suburb. The property is mainly retail with a residential element overhead - in terms of rental values, I'd say that the commercial:residential split is 65:35.

Obviously, the sale price of any property is somewhat subjective, but has anyone got a good feel for what kind of yield properties of this type should achieve in this market - the tenant is offering a multiple of 17 times the rent, having spoken to a couple of estate agents they say they can get 20 times the rent (but they would say that!).

Has anyone got any views / data on this topic?
 
There are methods of calculating property values scietifically based on rental yield etc.
These ways are ultimately only a guide, as the price is, in reality what the market is prepared to pay.
From what you state it is impossible to have any feel for value of it, but
The EAs advise a value of 20x and your tenant 17x so your value is somewhere between the two quite simply put.
17 in hand or 20 in the bush? Use the EA valuations to negotiate up?...it is his opening gambit after all.
He obviously wants it......
 
Why not check out prices for similar properties in the area, then deduct however much rent the renter has paid you since they moved in? that way you avoid hassle and he feels as if he has been given a good price? Also in reality over time you have not recieved any less money from this guy than if you sold at EA market value?
 
whizzbang said:
Why not check out prices for similar properties in the area, then deduct however much rent the renter has paid you since they moved in? that way you avoid hassle and he feels as if he has been given a good price? Also in reality over time you have not recieved any less money from this guy than if you sold at EA market value?
Click to expand...

Why should s/he do this? If the OP has a mortgage on the property then he has been paying interest. The rent is the rent and nothing to do with the sale. I'd get at least 3 valuations and average them out. It's up to you then whether you want to give the tenant a discount.......maybe meet somewhere between the 17 and 20% if this is close to the valuations.
 
You'll also save advertising & estate agent fees, as well as the hassle of viewings and waiting for a buyer if you go with the renter. Always room for neogotiation, see if you can get them up to 18...
 
Hi,

Thanks for the comments / responses.

Monkeyboy - your comment re his 'opening gambit' was right on the button. I've told tenant that 17 times rent is too low and he is gone off to do his sums again.
At the moment, I'm not inclined to let it go at anything less than full market value (definitely no reduction for rent paid!). I don't mind whether I sell it or not and if the tenant really wants it then there is a good argument to say that he should pay a small premium over market value to do so. The big question is - what is market value and I'll only find that out if I put it on the open market!
 
San Martino said:
Hi,

Thanks for the comments / responses.

Monkeyboy - your comment re his 'opening gambit' was right on the button. I've told tenant that 17 times rent is too low and he is gone off to do his sums again.
At the moment, I'm not inclined to let it go at anything less than full market value (definitely no reduction for rent paid!). I don't mind whether I sell it or not and if the tenant really wants it then there is a good argument to say that he should pay a small premium over market value to do so. The big question is - what is market value and I'll only find that out if I put it on the open market!
Click to expand...

It might me worth taking a look at what direction house prices in your areas are going? Also, how long does it take to sell house in your area? One in the hand two in the bush and all that.
 
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