This is a specific situation I see pretty often. You developed a flex building 15 or 20 years ago. Maybe you were a contractor yourself and you built it for your own use plus some extra bays to rent out. Now you’re looking to sell the whole thing.
The good news: flex buildings that were built by their owners tend to be solid. You didn’t cut corners because you had to use the building yourself. The bad news: you might have some emotional attachment to what you spent building it, and that doesn’t always line up with what the market will pay.
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Compare build cost to replacement cost: What did you spend to build versus what it would cost today? The delta is likely your actual appreciation. Use current construction pricing ($120-150/SF for flex in the Carolinas). -
Normalize self-use unit income: Even if you occupied bays rent-free, buyers will value them at current market rent. Document what comparable vacant bays would rent for in your market today. -
Gather all documentation: Compile every lease, rent roll, maintenance record, and improvement made since construction. Clean documentation supports higher prices and faster sales. -
Get a professional appraisal: Commission a real estate appraisal based on income approach (cap rate method). This removes emotion and gives you a market-based value independent of construction cost.
Construction cost vs. market value
The single biggest disconnect I see. “I put $1.5M into building this. It should be worth at least that.” Maybe. Maybe not. The market doesn’t care what you spent. It cares about what the building earns today.
The Hard Truth About Owner-Built Flex Buildings
Buildings that were built by their owners tend to be solidly constructed and well-maintained. But that quality advantage doesn’t translate into a higher price if the income doesn’t support it. A buyer pricing a building on a 7.5% cap rate gets the same value per dollar of NOI regardless of whether the building was self-built or built by a developer. What does matter: the documentation of income, the quality of tenants, and the remaining term on leases.
Now, the good news is that construction costs have gone way up since you built it. What cost you $60/SF to build in 2005 would cost $130+ to build today. So in most cases, your building’s market value has appreciated well beyond your construction cost. That’s a nice position to be in.
The self-use complication
If you’ve been using one or more bays for your own business, that income needs to be normalized. You might not have been paying yourself rent, or you’ve been paying below market. A buyer is going to value the building based on what those units would rent for at market rates with a real tenant.
I bought a building in Asheville from a contractor who had built it in 2008. He used four of the eight bays himself and rented the other four. His rental income was solid but his own bays weren’t generating any documented revenue. I valued the whole building at market rent for all eight units, minus a lease-up discount for his four bays since they’d need tenants after he moved out.
Documentation matters
If you built the building yourself, you might not have great records. Rent rolls might be informal. Leases might be handshake deals. Maintenance records might be in your head. All of that makes it harder for a buyer to underwrite. The more documentation you can provide, the cleaner the deal and the better your price.
Seller takeaway
If you built a flex building in Rock Hill or anywhere in the Carolinas and you’re thinking about selling, call Jim Kittridge at 704-600-3839. These are some of the favorite deals because the construction quality is usually solid and the buildings are often in established neighborhoods.
If you built a flex building in Rock Hill or anywhere in the Carolinas and you’re thinking about selling, I’d love to see it. These are some of my favorite deals. 704-600-3839.
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