What is the Proper Way to Value "Dual" Quads?

[Todd Magin]

I'm looking at two quads being sold together. Do I valuate them as one 8 unit property based on their cash flow (NOI / Cap Rate) or as two separate quads based on comps in the area?

Should I do both evaluations, and then choose the "best" one (in my favor) when making my offer?

FYI, the properties are taxed separately, so I can buy them using conventional financing.  The ability to get conventional financing along with below market rents (managed by a church) makes this deal especially appealing.  I'm early in the discovery process, but my (unconfirmed) numbers indicate that I'll get a 12% cash on cash return before raising rents to market value, and a potential 25% after rents are brought up.

[William Hochstedler]

Assessed values depend heavily on your county's resources and methodology.

Most that I'm aware of use the cost approach meaning that they figure the cost to build using square footage and materials used, then depreciate the building components based on age.

The objective of the assessor is to value the property at the highest possible amount without the assessed value being challenged.  So in a way, it's a consensus value.

However, these numbers may not be adjusted for years unless your county uses algorithms that they can apply over entire areas.  So they can be really problematic in shifting markets.

Also, your county may assess land separately from improvements and may have premiums placed on commercial properties which sometimes include rentals, etc.

So they shouldn't be relied on, but can have the chance of being pretty close.

They can be particularly useful when filtering large volumes of properties quickly (for tax lien sales, for instance).