Valuation of rental portfolio

Buying & Selling Real Estate
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Valuation of rental portfolio

Katie Sorensen
Rental Property Investor · Arvada, CO · Member since 2017 · 60 posts · 18 votes

Hi all

We are considering selling our rental portfolio in OH and could use some help with the valuation of it.

The basics of it:

12 properties and 15 units from 11 SFH and one 4-plex

Most are in Toledo, one is in Maple Heights (outside of Cleveland), the 4 plex is in Akron, OH
Gross rents are $10,340/mo. Two units are under market value rent.
Insurance on whole portfolio is $731/mo
Property management is in place for 10% fee.

Market value based on sales approach is around $725,000. We aren't sure if we should market it for sale at this value or use a different valuation approach. Any insight would be greatly appreciated!

Thanks in advance.

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Ryan Evans
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
6y

As @Daniel Kramer said, you'll cut down your buyer pool quite a bit so only bigger investors will consider it as a full package. Even more so because you're in three different cities and Ohio is already so hit or miss on a micro scale. There are very few investors with knowledge of all three of those markets. 

Maybe consider selling the Toledo properties as a package and then the other two properties individually to maximize your reach. 

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  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    Some random thoughts, although more time consuming, you stand to make more money selling the SFH to owner occupants. Especially in this market.

    Most investors are going to have some equation they use to price residential investment property, for example, I pay 60X gross rents for rent ready properties in C+ or better neighborhoods.  

    I would probably reach out to a local real estate agent and get there take on the value.  

    1Reply
  • Kelly Pierce
    Realtor · Sacramento, CA · Member since 2019 · 61 posts · 21 votes
    6y

    @Jacob Sampson although I agree with you Jacob in order to do a 1031 exchange which I assume will be done in this scenario a package sell is much easier, not to mention owner occupied means they have to give notice to all those tenants, also a headache.

    2Reply
  • Daniel Kramer
    Rental Property Investor · Toledo, OH · Member since 2019 · 115 posts · 72 votes
    6y

    @Katie Sorensen

    I'm not an expert on pricing, but I get notifications for Toledo. So my two cents is that it should be priced via pro forma and a fair cap rate as any commercial property would. When you put up an entire portfolio for sale, you're naturally cutting down your potential buyer pool to bigger investors. They're doing you a favor by not making you sell off each one individually, which would be daunting. They're compromising by taking a package deal and maybe buying a couple properties they wouldn't normally. So I don't think you can expect it to sell for full market value unless you determine it's worth it to do the legwork and sell off each one individually.

    Dan

    2Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    Depends on the neighborhood but I'd assume 1.5% - 2% rent to price.

    Gross rent of 10,340 = price between 517,000 - 689,000. 

    The lower you go on the range the faster you'll sell it off.

    1Reply
  • Ryan Evans
    Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    6y

    As @Daniel Kramer said, you'll cut down your buyer pool quite a bit so only bigger investors will consider it as a full package. Even more so because you're in three different cities and Ohio is already so hit or miss on a micro scale. There are very few investors with knowledge of all three of those markets. 

    Maybe consider selling the Toledo properties as a package and then the other two properties individually to maximize your reach. 

    4Reply
  • Daniel Kramer
    Rental Property Investor · Toledo, OH · Member since 2019 · 115 posts · 72 votes
    6y

    Good suggestion from @Ryan Evans on splitting it up by location. I suggest having a separate agent for each as well.

    1Reply
  • Stone Jin
    Rental Property Investor · Chandler AZ and Sylvania, OH · Member since 2009 · 708 posts · 561 votes
    6y

    @Katie Sorensen

    Try putting it on roofstock at your price and see what you get?  Not sure the condition of the properties you may want to sell turnkey.  Maybe talk to some of the turnkey providers in the area to partner up.

    1Reply
  • Chad Boyers
    Real Estate Agent · Toledo, OH · Member since 2019 · 88 posts · 38 votes
    6y

    @Katie Sorensen I agree with a couple of the suggestions regarding selling separately by area.

    Regarding packaging the Toledo properties, I think there are details that need to be known.

    1) Are all properties currently occupied? What are the lease terms?

    2) Are you looking to do a 1031 exchange?

    3) Are the homes all in the same area or similar types of neighborhoods?

    Answers to these questions can help you decide which method of valuing/selling the properties is best for your situation.

    0Reply
  • Katie Sorensen
    OP
    Rental Property Investor · Arvada, CO · Member since 2017 · 60 posts · 18 votes
    6y

    @Stone Jin good idea, thanks.

    0Reply
  • Katie Sorensen
    OP
    Rental Property Investor · Arvada, CO · Member since 2017 · 60 posts · 18 votes
    6y

    @Chad Boyers

    Thanks for your comment. Most are occupied. 2 are on the market to be leased, one needs rental level fix up before back on the rental market.

    I’m going to consider 1031 but am not sure yet. They are all in decent neighborhoods and are similar in condition and areas across the portfolio.

    0Reply
  • Katie Sorensen
    OP
    Rental Property Investor · Arvada, CO · Member since 2017 · 60 posts · 18 votes
    6y

    @Ryan Evans agreed. I think I will do split by city at least.

    0Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    Several similar size portfolios have come up in my market lately. The sellers made the mistake of taking offers on some of the best properties, and broke them up. Now the left overs are sitting. If you decide to sell as a portfolio, don't let people start to cherry pick, unless you're willing to wait on the last few. I agree you will make more selling individually, but it may not be worth the time, and the issues it causes for a potential 1031. However, if you're moving your money out of real estate, it might make more sense to just sell them off as they become vacant.

    [email protected]979-218-2286
    Joseph Cacciapaglia powered by Morty
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    1Reply
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