How do you value an apartment building

Question

I'm trying to figure out what is the proper way to get an estimated ARV after renovation of an apartment building. I know for single family homes, it would go by comps in the neighborhood, but apartments I know are different.

Does anyone know the right "formula"?

Kimberly Ferguson · Answer

@Alina Trigub Could you share the multi-family calculator? I own a 7 unit and a 12 unit that I am thinking about refinancing and would like to see the calculator.

Thanks, Kimberly

Kuba F. · Answer

@Brandon Swartwood

You might find this BiggerPockets post I wrote to be helpful in analyzing an income property. It not only explains what each metric in a complete analysis is but also what the formulas are (for example, NOI) and how they all work together: https://www.biggerpockets.com/blogs/8814/73755-18-essential-metrics-to-a-complete-real-estate-investment-analysis

Reach out if I can help with anything and best of luck.

Alina Trigub · Answer

@Brandon Swartwood PM me your email address.

Brandon S. · Answer

@Alina Trigub Thanks Alina! Can you give me the one you have for smaller multi-families?

Alina Trigub · Answer

@Brandon Swartwood

There are several methods to calculate the property value. The most common and perhaps most accurate is the income approach. It entails the following steps:

• Calculate the Net Operating Income
• Determine the appropriate Capitalization Rate (or ask your broker)
• Divide the Net Operating Income by the Cap Rate to arrive at an estimated value

While the steps are simple, the underwriting is a bit more complex. You can probably find some calculators under the Tools > Fireplace section of BP.

If you have a smaller multi-family, I can give a calculator I have.  It's always good to use several to validate your results.

Best!