Valuing a Five Unit Noncomforming Building
I am looking at purchasing a building with five units that is currently owned by a “permissive” landlord. The units are renting out at slightly below market (maybe $100-200 per unit), but they are in significantly worse shape than other units on the market. The rooms definitely need a facelift (paint/floor refinishing) but may need more work (I have not yet gotten to the inspection phase). I tend to think that they are renting out close to market because the landlord turns a blind eye to the fact that there are 7+ people living in units suited for 2-4 people. I wouldn’t permit this to continue if I owned the building, so I’m having a hard time determining how to value the place. Can anyone offer any advice on this topic?