Criteria for investing in Mulftifamily Residential vs. Commercial

1 Reply

I think I know the difference in analyzing multifamily deals residential (2-4 units) vs 5+ units (apartment buildings), but I want to make sure. Small multifamily residential you analyze based on comps, squarefootage, features, and condition whereas apartment buildings you analyze based on income and cashflow that the property generates. Is this correct? If not, or if my assessment is a bit off, could somebody please correct me?

@Ben Feder

Yes, commercial multifamily's value is based off the current NOI (debt service not included). Currently with the market where it is, many investors are (over) paying for properties in the hopes of making their money by doing some work and increasing the rents (value-add). This is a viable model until there is a pull back.