Information on CMA for Multifamily units

7 Replies

I would like to know what kind of questions to ask when speaking to a realtor about a Multifamily units. I'm learning that CMA is really important but I need more info. Can anyone help on this topic.

Hey, @Jamila L Scales -

How many units are you considering?  Are you thinking 2-4 units or 5+?  

2-4 units will be considered residential and eligible for such financing. Once you get into the 5+ territory, you'll be looking at commercial financing and will want to evaluate the financials (rent roll, profit and loss/t-12) in order to breakdown the NOI. Applying the appropriate cap rate to the NOI will give you a good idea of the market valuation or potential.

Most realtors don't know much about investment properties. You have to be the one to control the analysis, you can't have anyone else do it for you. That being said, you should get a buyers agent that is a Realtor working on your team. They can gather and provide you with the information that you need for your analysis like average rents based on bedrooms, average utility costs, information about the area/neighborhood, and general market conditions. They can also introduce you to other people you need on your team like a good home inspectors, lenders, closing attorneys, property managers, contractors, movers, and anyone else somewhat involved with the industry. The Agent will help you find properties, coordinate getting you into see them (which can be tough with multi-families) and do what they need to do to keep the deal progressing. They'll monitoring the deal and the dates in your contracts to make sure everything stays on track. They're the person you call at 9pm at night when you need someone to answer questions and reassure you that things are coming together. 

All that being said at the end of the day it's your investment so you have to control the analysis, it's you're deal you must treat it as such. Ask questions, a good agent will know the answer or know how to get the answer. If they provide you with a CMA say thank you and then put it to the side and do your own analysis. Every investor is different and your CMA will be very different than my CMA because we will have different assumptions and look at the same deal very differently.

Hi @Jamila L Scales

Good advice so far, and I would add to what @Jonathan Bombaci wrote.  A buyer's agent is not necessarily the best option.  They'll have most of their experience from working with other buyers, and usually in the residential markets.  The multi-family market is slightly different.  We're (usually) looking for properties that have cash flow, and a buyer's agent might not specialize in running the numbers to analyze an investment.

The remaining advice about seeking a REALTOR for their networks and knowledge is all solid advice.  When I purchased my current duplex I didn't yet have my license, and I did the cash flow analysis myself.  During the funding phase, the appraisal included some baseline estimates for rental income, vacancy rate, etc. and those aligned with what I had estimated.  So my recommendation is to use the resources here on BP to figure out the merits of the deal, and use the REALTOR for their networks.  Bonus if you find a REALTOR that has worked with investors or is an investor, because you'll be able to speak the same language and they'll likely have a better network of lenders, inspectors, property managers, etc than a regular broker.

Good luck!