How do you appraise an apartment building?

8 Replies

So there is an apartment building I am trying to appraised but I need some assistance. Its 2 buildings attach to each other but has 2 separate address. 

The bottom floor is a restaurant and its spans the entire area of both buildings A & B. 

Building A has

1 apt  on floor 1

1 apt on floor 2

Building B has

1 apt floor 1

1  apartment that spans across building A&B floor 2

1 apartment that spans across building A&B floor 3

so there is a total of 6 units, How do i figure out whats it really worth?

Hi @Ryan Lee - Depends on the lender and appraiser. Most of the commercial properties I've purchased in the past couple years have been appraised using a combo of Income Approach AND Comps. To figure out what it's worth based on the NOI you'd need to find out what the Cap Rate is in that area for that type of property. And cap rates are not set in stone. Talk to Broker A and they may say cap rate of 6.5 and then Broker B might say 7.5. That can have a huge impact on appraisal price. Then depending on what's sold in your area recently... nailing down a price, unfortunately is a little bit of a crap-shoot. Depends on the appraiser you get.

@Nicole Draper My business is not focused on wholesaling, but I know several wholesalers and I will say this. I would never make a reckless claim that I know what "most" wholesalers, or agents, or anyone else are doing out there. Nor would I claim to say what was or was not legal without knowing what the laws are in every state, and how individuals are operating in all of those different operating environments. So, I don't. I know, and more importantly, some of the very best real estate attorneys in my state define a process that is 100% aligned with the law. The fact is that each state has different laws and defines legal contractual rights of all parties. So, if an experienced real estate attorney in a specific state defines a process for their clients that allows them to "wholesale" (contract assignment, specifically, is illegal in PA, so no one I know does that specifically), then unless something changes materially in my state and everyone I know is operating under those rules, then all of the noise by those who may have self serving interests to cry foul out there does not matter to me because I know that those who follow those processes are acting well within their legal rights. (Long sentence, I know. My dinner is getting cold.)

I apologize to all. I was following multiple threads that I wanted to comment on. Please ignore the above post!

Originally posted by @Salvatore Lentini :

Hi @Ryan Lee - Depends on the lender and appraiser. Most of the commercial properties I've purchased in the past couple years have been appraised using a combo of Income Approach AND Comps. To figure out what it's worth based on the NOI you'd need to find out what the Cap Rate is in that area for that type of property. And cap rates are not set in stone. Talk to Broker A and they may say cap rate of 6.5 and then Broker B might say 7.5. That can have a huge impact on appraisal price. Then depending on what's sold in your area recently... nailing down a price, unfortunately is a little bit of a crap-shoot. Depends on the appraiser you get.

Thanks for the advice, working with a commercial agent to see what its worth. Owner is a little upset on our offer but that means I am in the right direction since they came back and gave me what they actually want for it. now some real negotiations can happen.