Valuing a 4-plex im considering purchasing

[Miles Stanley]

Hello all,

I've been heavily focused on SFR buy and hold analysis and I'm thinking about looking at a 4-plex in my area. When looking at the ARV, etc...how exactly is the ARV determined on a 4-plex. Before you say comps, let's say comps are scarce in this area for this type of property. What then? You can find SFR comps all day, but it seems MF comps aren't as plentiful.

[Andrew Syrios]

Comps for small multi's are challenging. Yes, you want to look at any comps you can find. If you have to look at duplexes, triplexes or 6plexes, that's fine, just make the appropriate adjustments. Even look at single families, not as a direct comparison, but to get an idea of the quality of the neighborhood.

Also, fourplex is about the time when you want to start looking at cap rates. Do you know about what cap rates in that area are going for normally? You can look at comps or ask agents to get a feel for it. (This is not an exact science). Then if you have an operating statement on the 4plex, that can give you an idea of what you're looking at. You can also use a pro forma, but use your own, not the seller's, and use conservative numbers. It is not at all uncommon for sellers to give grossly exaggerated pro formas to puff up the supposed value of the property they are trying to sell.