Looking for some advice and valuating a portfolio of single family and small multifamily (2-4 unit) properties. The portfolio consists of 65 properties making up 104 units. My experience is mainly in multifamily properties as well as commercial investment properties, but I'm not feeling like it makes sense to value this portfolio like I would a single 104 unit property. 

Most of these properties are located in the same geographic area, within a couple miles of each other. Single family home values in this area mostly vary between $50k and $100k.  

When it comes to multifamily properties, most investors in my area try to purchase at around $30k/ door. At $30k/door, with its current NOI, it's about a 14.2% cap rate. Very high for a multifamily property here, but again I can't see valuing this as one.

Does anyone have any experience with this type of deal, or have any insight?

@Kevin Vandenboss I don’t have a ton of insight, I’ve only been a part of one large portfolio valuation. It wasn’t done based on trying to make it a large commercial multifamily but rather on BPOs but with a hefty discount. The purpose (way back when) was buy it and then parcel it out. Not too many people want to deal with this many low-dollar properties. It’s legwork, massive legwork. Far more than a single apartment complex.

Are you trying to arrive at a value to sell the portfolio or just to inform the owner?

@Andrew Johnson Thank you for the reply. A client of mine owns them all and wants to sell them off in one deal, so I'm just trying to come up with a fair price. I know what he wants for them, but want to make sure it's a price we can actually sell it at, and also want to make sure he's not leaving any money on the table. Looking at other portfolios for sale, the valuations seem to be all over the place. 

@Kevin Vandenboss For what it’s worth, every time that I’ve (personally) looked at portfolios there’s a handful of gems and some “dogs with fleas”. You have to take the flea ridden canines if you want the good stuff. And that’s the rub when it comes to the pricing. What’s scared me away from portfolios is the “What do I do with the dogs?” quandary. Most owners are savvy enough not to let someone cherry-pick their best properties but I’ve never been able to put together an attractive offer (for a buyer) because for me it’s: “Hey, I’ll pay retail for the good stuff and whatever upside there is will be in the junk, and it’s gonna take me a while to figure out what to do what junk!” Owners may know it’s junk but they still want money for it...

Anyway, this really isn’t helping you much but (for your owners sake) don’t let someone come in a cherry pick the top...not matter how attractive the price :)

@Andrew Johnson Thank you, that actually is helpful! I'll let you know what I come up with on it 

@Kevin Vandenboss We've valued and sold hundreds of similar portfolios. Not much of a difference from apartment complexes other than management fee, payroll, debt terms, and utilities. Of course this varies state-by-state. Also, with Section 8 tenants we typically see higher R&M. Hope this helps! Best of luck!

@Kevin Vandenboss You can value based off income or comps. What matters is (A) how sophisticated is your buyer pool, (B) what are discount/return expectations and (C) state of the market. 

A sophisticated buyer who wants to parcel units out will see the delta between the income and comps valuation and layer in costs/fees/return expectations to manage/sell this portfolio. Nonetheless, the price this type of buyer will get upon eventual sale (by parceling units) will be based off comps. So eventually, a basic level of standard comp analysis will be required. 

As @Andrew Johnson states that it's the dogs that always make me wary of these types of portfolios. Investors get enamored with the high cap rates (which is just another way of stating the risk the market assigns to a property, not it's true potential). They don't account for headaches, inconveniences and the difference between forecasted and actual returns.