How to do a CMA for a Multifamily Property?

Question

Hi BP Community!

One of my clients reached out and asked me to sell one of their multifamily properties. It's currently a vacant 9-unit building that they just renovated. Any idea how I can do a price analysis on this?

Thanks in advance!

Isaac Fridmann · Answer

If you're going to post a reply, why not post something that's helpful instead of criticizing? Yes, I am a realtor but I've never had to run comps on a commercial building, I'm sure you know it's very different than doing a CMA for residential properties.

Bob S. · Answer

You're a realtor and you are asking how to run comps?? What am I not understanding? I can run comps and I am not even a realtor

Bob S. · Answer

Got it , well just see what rents are for the area, and use the income approach. I would just expand my search to more than a mile,

Al the best

Isaac Fridmann · Answer

Bob, as mentioned before, doing a cma on residential vs commercial is very different, and just because someone is a realtor, it doesn't automatically mean they can value any property. The issue I'm having is that there aren't any recently sold properties in the area, and the property is vacant so I can't do it based on recently sold properties or the cap rate, hence the fact I reached out to the community.

Minna Reid · Answer

It is a very different CMA, and complicated, especially the first time. Better to ask than assume.

One comp is not enough. Expand the area, or go back further in time to find more. This may require adjusting for changes in the market since that time, or neighborhood differences if you venture out very far. You may also have to look at non mls sources like tax records or loopnet to find other similar properties.

You still may not find exact matches, but you will have more to work with. It's not an exact science since all homes are unique, but after a while you'll get a feel for it, just like SFs. Also - the income/expenses are really critical. Every MF buyer is looking at their bottom line and how much they will make monthly/yearly. You need to be able to give them these stats. Figure out what each unit would rent for, what the future expenses may be, and how much a buyer could profit after all costs from owning this property at various price points. You need to price it where there is an acceptable amount of profit for a buyer to be interested. Again - back to the cap rates - you will have to calculate the going cap rate for your area based on other sales. Its not an easy comp. You can easily spend hours digging through old data to get the price right, but that's what they hired you for lol.

Keep in mind rates have risen substantially which will impact the profitability of the property for anyone getting funding.

Bob S. · Answer

Sorry didnt mean to come across that way. It just seems odd a realtor is asking how to run comps? You can do it on the cash basis and or value, I am not a realtor, and I can provide the value of any property ,SF MF in my market

Good luck

Minna Reid · Answer

You will want to look for sales of other similar MF buildings. If you can find a nearby remodeled 9 unit that would be ideal. If not, you will want to look for properties that are as similar as possible and adjust for differences (# of units, bed/baths, sq ft, condition, etc). For multi's you will also want to analyze local rents and project future income/expenses to come up with an estimated CAP rate. You should price it to have a similar CAP rate as other local similar recently sold MFs. You should be able to find most of this info on your MLS/tax records, but you will probably also have to examine the documents included with the sales of MF's which sometimes include all the income/expense info.

How to do a CMA for a Multifamily Property?

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