how to run comps on a 3 unit multifamily?

8 Replies

im working as a real estate agent at keller williams in New hampshire, NH.   i am trying to get comps on this 3 family and it isn't working too well.  i have other people in the office helping me out a little bit but they all have a different way of doing it and each say "multi-families are hard".

was hoping investors had a better way of being able to run comps using nneren.

my prices are ranging from 140k-230k

I use the rent to determine comps on multi families. I have investors that will buy any property in a A, B, or C class area where the rent is at least 1.5% of the all in cost. So, if I have a seller that has a duplex that is making say 1500 in rent for both doors combined that needs about 10k in repairs I will do the following.

1500 is 1.5% of 100,000 minus 10k in repairs = 90k minus 10k to purchase my option to buy the property = 80k so that is the offer I would submit.

This would obviously vary per market, but if you can determine what people are willing to pay by what sold (figure out what percentage the rent is to their all in cost) then you can apply that market average percentage to other multi family properties. 

Thanks and hope that helps.

First, the price spread is waaay too much, you can begin by pulling comps about 20% below and above your estimated price for a range, you can exceed 10% in adjustment for a good assessment. This goes to your market approach.

As Will mention, inventory can be limited, in that case you rely more on the income approach and replacement less depreciation. Depreciate from the economic life. You need at least two approaches to value to rely on more heavily than the third. 

You might look to a weighted average of the contribution of smaller and larger unites, a duplex and 4-plex for a tr-pex. You know you only make adjustments to the comps, never the subject. Bring the comps in to be most similar to the subject.

If you can't find comps, an appraiser may not either, properties that can't be comparable aren't really marketable since financing will be necessary. 

If there is a loan on it, talk to that lender, they may be willing to finance it again and they can tell the owner/borrower what they carry the loan to value at. 

I have had properties appraised through banks and hold open the appraisal. The bank must be the client and pay the appraiser, sometimes that can be worked out. You can tell a buyer the bank already has the appraisal and it can save them money if the apply there. You know you can't direct a buyer to a lender. And, depending on the policy of another lender, that first lender may "assign" the package to another lender, so long as it doesn't get out of the control and custody of the lenders. 

Good luck :)  

What area of NH are you looking if you don't mind me asking.  I have noticed that the larger towns and cities have more concentration (especially in the south and east of NH).  So for my understanding a good way to judge it is to take the property and based off of local rents for that area get the average % of rent to value, subtract repairs and there is your comp value.  OR, adjust 2 or 4 down to the 3 in order to figure out market values.  Makes sense.

Multifamily can be hard to find comps for, at least I have found that in my area.

So while I still try and get comps, I tend to evaluate multifamily more with cash flow metrics then a ton of comps. You always want to make sure you get a good deal, but honestly I don't really care if a property is about or below the "market" if it had great cashflow and fits with your goals and strategy then it is probably worth it!

As a fellow agent, I would say you need to price it where you can sell it!  You'll know your local market better than we will, so ultimately you should rely on your own opinion of where it needs to be to sell.  Are you working with buyers on the market for this product?  If you are, then the best place to start asking is with them.  Your local investment market, as large or as small as it is, does have buyers.  By knowing your market's frequency of transactions you can gauge where 1.  You could potentially sell it for full retail.  2. Where you can price it and probably sell it in 90 days. and 3.  Where you need to price it to get action.  I personally like #3 but I'm in a decent sized market and it doesn't backfire with an appropriate marketing campaign.  It also yields quick sales, often at or above list price.