Multifamily Comp with Single Family

[Ashton Aaron Young]

Hey guys I have a quick question in regards to valuating a duplex in a smaller community that has no other multifamily properties sold in the last year. Is it practical or advisable to comp a duplex property(2Bd 1Ba per side) to a single family home that is 4Bd 2Ba? The properties are similar in all the other valuation metrics. 

Thanks for any help!

[Nathan A.]

Are there 2bd 1ba comps in the area? What about comping it to those and multiplying by two?

[Lawrence Potts]

Hey @Ashton Aaron Young, that's a really good question. As far as I know, it is not normal for appraisers to use comparables from two different asset classes. Typically you should only see SFR's being comped with SFR's. You might see something where they'll take duplexes that are larger or smaller that have sold recently in a mile +/- radius from the subject property or even triplexes that are closer to size and make adjustments to them to accommodate, but my bet is that is a last resort measure. The only other ways to determine that an appraiser may look at are:

1. the performance of the property (income).

2. how much it would cost to build new.

I know these don't necessarily help you out, but I would always error on the side of caution in these types of situations and measure the way an appraiser would measure value. Because if you do end up buying this and an appraiser is needed for acquisition lending or for refinancing, you don't want any surprises because you used bad comparables that skewed your numbers.