Does appreciation % reduce with the number of units?

Question

Would the rate at which a 2 - 4 unit property appreciate be more than a 20 unit property in the same area? I presume that there would be a lot of buyers with an appetite to buy a 2 unit property (i.e high demand) but the pool of investors would be lesser for large multifamilies (i.e. low demand) and as such, the large multifamilies would appreciate at a lesser rate. Can you please share your thoughts?

Cory Carlson · Answer

2-4 unit properties are convoluted with more than one valuation method being both the income and comparable sales approach. In my opinion, you're comparing apples to oranges here. A 20-unit building will be valued based on the income approach alone and largely valued due to the returns. Market driven appreciation is very subjective as opposed to forced appreciation through rent bumps and improving NOI. My 20 unit listings seem to go just as quick as the 2-4  unit ones in the PNW markets.

Does appreciation % reduce with the number of units?

1 Reply