Newbie looking to purchase

[Beano]

I am looking at buying two commercial properties listed by the same seller. I have no problem valuing one of them using rate of return I want. The question I have is on the 2nd property which has 1 lease for 40% of the floor space returning $12,000 net per annum, this is on a 7yr lease consisting 3x2x2 currently over 2 years of the first 3yr term. The 2nd part of the property which is 60% of the property is on a month by moth agreement returning only $5,500 net after landlord has paid outgoings. I am looking a wanting a 10% return and so value the property at about $175,000. However as of 2014 the GV was $377k with the land value portion being $127k. the reality is this will have gone up this year by about 25%. While I see my required return valuing the property at $175k it is clear this would not be accepted due to GV. Is there a formula for coming up with a value taking into consideration the required return and the GV.
Thanks
Robert

I would not pay much notice to the GV/CV on a commercial property
Some are quite different from the market value
I would just sit down with the agent and show him how you reached number ($175k) then put pen to paper on a offer
Let us know how you got on

[Rosco]

What the earthquake % like? If it needs earthquake improvements in the future, you need to factor that in too.

Ross

[Wayne]

this is on a 7yr lease consisting 3x2x2 currently over 2 years of the first 3yr term.

3x2x2 is not a 7 year lease. It is a 3 year lease with 2 rights of renewal if the Tenant wants to.
Being 2 years into the 1st 3 year term means you have 1 year is surety of income left - not 5.
The tenant can extend ofor another 2 years if they wish - but may not.

[Halfway To Paradise]

3x2x2 is not a 7 year lease. It is a 3 year lease with 2 rights of renewal if the Tenant wants to.
Being 2 years into the 1st 3 year term means you have 1 year is surety of income left - not 5.
The tenant can extend ofor another 2 years if they wish - but may not.

Thanks Wayne I fully understood that, it was just my poor terminology.

[Halfway To Paradise]

Looks ok from what I have been told, however will do appropriate due diligence.

[Halfway To Paradise]

I would not pay much notice to the GV/CV on a commercial property
Some are quite different from the market value
I would just sit down with the agent and show him how you reached number ($175k) then put pen to paper on a offer
Let us know how you got on

That was my thoughts initially, just it seems strange offering at way under half GV but I do understand it. Will let you know what happens.

[Halfway To Paradise]

I would not pay much notice to the GV/CV on a commercial property
Some are quite different from the market value
I would just sit down with the agent and show him how you reached number ($175k) then put pen to paper on a offer
Let us know how you got on

They have been on the market a long time, I am going to put off an offer until I have had my holiday in 2 weeks time. The only mistake I made with buying property was when I was feeling rushed and under h'pressure' of my holiday.