Evaluating the value of a multi-family

5 Replies

I've stumble across a potential multi-family deal that needs some work. I'm trying to evaluate the ARV of the property and need some guidance. The property is a lot with 6 houses on it. It has septic issues, or lack there of. I'm thinking there is a potential to fix the septic and refi the property using the BRRRR strategy. This issue is finding comps.

Is it reasonable to find houses similar to what is on the property and add their values. For example the property has the following a three bedroom two bath, 2 x two bedroom 1 baths, and 3 x 1 bedrooms 1 baths. If I found similar houses in the area is it reasonable to add those values to get an estimate of the ARV, everything else being comparable?

@Ryan Van Fleet - If these properties are all on one plot of land then adding up similar SFR comps would not work. If they are all on separate parcels and could be sold individually then that approach should be fine.

It might not hurt to call a local appraiser that may be familiar with the area and see how they might look at the property.  An appraiser is ultimately who will make that call for a refinance so if you're not on the same page with them it doesn't matter what you think the property is worth!

I'm with Michael...contact an appraiser and the bank.  I usually prefer to provide answers here but unique properties like this, if they can't be subdivided, provide big financing and resale challenges.  I have two duplexes on the same lot and simply comping a single duplexes times two or using a quad does not work...six houses on one lot is even more unique...trying finding comps for that.  There can be good opportunities in these unique properties for the right strategy and if you can power through things that others would avoid but you have to have eyes wide open of the challenges and the proper valuation due to them. 

I think I knew that was going to be the answer, but sometimes you just need to here for it to sink.

Thanks for the advice

@Ryan Van Fleet

This property sounds like what Fixer Jay (Jay P. DeCima) would call a leper property. Multiple distressed homes on a single lot that cannot be bank financed. His idea BRRRR situation. You might be able to work a Seller Finance deal out of this. You might look at it from the income side verses ARV and Comps for now. What are the current rents for the property? What are the market rent rates for each type unit? What is asking price? Try to get some idea of the rehab needed. Put together an offer based on conservative projected Income + rehab + ROI (12%?). Then negotiate a reasonable mortgage (low down payment, interest percentage, term length, no restrictions). Obviously you must make sure it has good cash flows by analyzing all expenses and mortgage payments.

Of course, do contact an appraiser as recommended.  Just an idea how to get the property.

@Ryan Van Fleet

Forgot to add this. This is considered a commercial property (5+ units), therefore, you should determine value based on income. Find out what the Cap Rate is for the area. Determine what the actual NOI is and divide by the Cap Rate (NOI/Cap Rate = Value).

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