Specialist · Brooklyn, NY · Member since 2019 · 67 posts · 10 votes
I am aware that with multi-family, ROI is key. However, given that residential real estate value is based on ARV, I am struggling to find comps on a rented 3 fam property that seems to be under-performing. Avg rents in the area indicate that we could get 50% more income but I'm unsure of my assessment.
Here are the specs:
3 Fam, 8 bed, 4 bath (2 x 3/1 duplex in front + 2/1 flat at the back), 2208 Sq ft, built in 1900 on a 3123 sqft lot. Currently rented at +- 4k monthly but avg rent for 2/1 in the area is 2300-2700.
@Joseph Cameron One option would be to put your proforma numbers together and apply a discounted cash flow analysis to back into a value. Do you need to renovate the units to get 50% more rent or is it just the current owner doesn't care and is making it easy on themselves?
I would also us the current rents and do a gross monthly rent multiplier based on other 2 family comps, and see what you get. i.e. 2 family comps are getting 120x gross monthly rent. Take the in-place rents of the property you are looking at and apply the same multiple for a valuation.
At least in Cincinnati, the challenge with any 2-3-4 family is you are competing against other investors, often with no experience, and owner-occupants who will pay a premium for the property.
@Evan Polaski much appreciated on the feedback. I would have to renovate the units and it turns out the tenants just signed a new lease so they are locked in. I applied the GRM method and didn't come up with a great number. I was able to do a cost per unit based on 2 fam and apply that method. Problem is there was only 1 comp and it came out significantly higher and almost looks impossible haha.
@Joseph Cameron welcome to the word of appraisal (I am not an appraiser). There is never truly a comp for your property or any. It is all a best guess. You, as any appraiser, need to take several approaches and then look at all of them. GRM on a comp comes out low, well that is one data point. Price per unit on a comp comes out high, thats another data point, and you try to consolidate them into a trending price.
@Evan Polaski well received and much needed insight. I'm learning as I go and uncovering nuanced info and approaches layer by layer. Loving it though and massively appreciate your input.