I am currently planning to do BRRRR on multifamily by improving ROI. I want to understand how calculation will look like when appraiser go for appraisal? This will help submit more meaningful offers.
PM, Maintenance & repair, vacancy: does appraiser use projected number (what % would they use?) or historical (how many month trailing)?
Rent: how many month of rent roll does appraiser look back? Will late payment affect the income level?
Other costs: tax, insurance, utilities, lawn&snow, are these all historical 12M trailing?
CAP rate: what’s the best way to estimate what appraiser might be using? (1% +/- could make a huge difference in return). Any trustworthy data sources where I can use to estimate?
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
1y
Appraisals will largely go through the same process you should when underwriting a property. They will look at a T12 and a T3 and assume the seller might be messing with the numbers. The usually have access to a lot of data so can compare industry standards (even local industry standard) to the property-specific performance and make adjustments as needed. This includes relevant sales to estimate the appropriate cap rate.
For example, one expense item that varies widely on small properties is management. Hiring a 3rd party manager could easily run 6-9% of revenue. Meanwhile, a mom & pop landlord might be doing all the work themselves and showing management costs at 0% of revenue. The appraiser should adjust accordingly.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y
Commercial appraisers have subscription data sources the average buyer doesn't have, CoStar for example. They use this data to comp income expenses and cap rates.
Real Estate Coach · Frisco, TX · Member since 2025 · 59 posts · 75 votes
1y
If your appraisal comes back and it seems out of "whack", you want to see about ordering a new one. There were a lot of issues with appraisals in the past which was causing appraisers to come in lower than normal on values.