Estimating After Repair Value of Multi-family properties

3 Replies

Does anyone have any tips on estimating after repair value (ARV) of a multi-family property. I am in the process of closing on a two unit property outside of Buffalo, NY and am deciding whether to use a mortgage or pay cash and BRRRR it. I have looked on Zillow and for comparable properties and what they have sold/ are selling for in the area in terms of square footage and bedrooms. Any other advice would be appreciated!

@Andrew Zbrzezny

The value of MF property for your purposes hinges on the amount you expect to be able to increase the rents after you are finished with your renovations. You don't need sales comps. Those aren't going to help you much at all in this case. You need rental comps. Look on Craigslist and Rentometer. Aside from increasing rent, can you charge rent for the storage units? Can you charge rent for any extra parking spaces beyond one per unit? 

Aside from increasing the income, the other thing you can do to increase your property value is to decrease expenses. Can you implement RUBS there and kick all the utilities back to the tenants? Is your property manager killing you with fees and overpriced repairs?

The number you need to track is your NOI. If you can increase your NOI 25%, then you have increased the value of your building 25% or more in most cases.

@Andrew Zbrzezny depending on which lender you go with your ARV is going to be based on a combination of market comps, and income or one or the other.

I have seen some banks just do an income based evaluation and some just do market comps. The best thing to do is just as you mentioned, get a good idea of what the market comps are for similar sold properties. Do a sq ft breakdown of the area to give yourself a general idea of what the average rehab sells for. Lastly, do an income based appraisal with a 10% CAP.

Jamestown Invest
Build a well-balanced portfolio with CRE
Considering CRE Investing?
Download this whitepaper and learn about CRE investing from a manager with a 38 year track record
Learn More

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you