How to Find the Value of Multifamily with No Comps

Question

I’m looking into investing in either a duplex or fourplex. But there’s also a small apartment complex that I’m interested in.

How do I go about finding the value of multifamily’s? I know that you look at comps with single family homes. But if there aren’t comps for the multifamily’s, how do I determine the value for an offer price?

Lucia Rushton · Answer

@Steven Cobb 2-4 doors will be on the MLS so your agent should be able to give you comps.

5+ is commercial and as mentioned you look at the NOI and CAP in the area. As a reminder it’s best not to buy commercial (5+) on proforma which is what most commercial brokers will suggest and steer their OM to show. If you have not purchased commercial before I highly recommend having someone who’s done it before to vet the deal with you. Best wishes

Ethan Wagner · Answer

@Steven Cobb direct capitalization and/or discounted cash flow

Grigory Pekarsky · Answer

The first thing you need to do is find out what properties are on the market in your area with similar size units or amenities. Then compare those properties' asking prices to their last sale price (or appraised value) if they have sold recently. This will give you an idea of what buyers are willing to pay for similar properties in your area--and it's often not far off from what sellers might be able to get if they're patient enough!

Another way to get an estimated value of your multifamily is to compare it against other nearby properties that are currently on the market. Keep in mind that you may not be able to do this if there isn't another property similar enough to yours nearby. If there's no other comparable properties, find the ones with the closest size and amenities and see what they're listed for! This can also work if you happen to have a smaller unit--try finding larger units within the same neighborhood or zip code so you can use them for comparison. One final note about doing your research: try looking at properties that were listed for sale in the past year or two, but never sold.

Taylor L. · Answer

If it's 5+ units the value will be based on the Net Operating Income and prevailing market cap rate. If it's a brokered property they should have financials you can start with.