What is one of the best ways to understand the true value a property?
As a private lender, we are unique in that we underwrite all our loan transactions in house (we do not require appraisals since one of the partners inspects all properties we lend on). Since we do not rely on appraisals, we are in many different areas evaluating both residential and commercial properties. Sure we pull comparables just like an appraiser, but we also have found that one of the best ways to evaluate a property is to get out of the car and take a walk of the neighborhood. Most people think that walking the neighborhood is only important on a residential property. It is equally important on a commercial property. What are three items to look for when walking a commercial property?
Walking a property provides a different prospective than just driving an area. When you are going by a property or a market at 30+ mph, it is easy to miss the nuances of the neighborhood. There are a number of items to observe when you are out of your car.
3 items to look for when walking a commercial area:
1) Ingress/Egress: How easy is it to get in and out of the property? This is important for all property types for example on an industrial building, can a truck easily take a left in and access loading/unloading areas. On a retail property, can customers easily enter and exit the property
2) What uses are around the property: On a retail property are the nearby tenants complimentary to your usage. On a commercial property, what are the buildings near the property used for (hazardous materials handling (ie body shop, paint, solvents, etc..) could these uses impact your property (contamination, smells, clientele, etc…)
3) Typical cars/people: Just like in a residential property, you want to know what the neighborhood is like. Who are the people you see in the neighborhood? What kind of vehicles are they driving? Do you feel safe walking in the area? Is the neighborhood the appropriate demographics for your business?
I walk (or sometimes run) near every property before making a loan. I recently had a close encounter on one of inspections. I was in Telluride, CO (SW Colorado ski town) and was looking at a commercial building. I was scheduled to inspect the property mid day so thought I would get up early and see what was going on in the market. I strapped on my running shoes for a route through downtown and the decided to take a little detour to some waterfalls above the town on a rocky old mining trail. I was about a mile out of town when I felt something close… really close and it was very large. I looked up and was face to face with a …. Continue reading
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