I've heard of using a standard appreciation rate for calculating projected appreciation for single family homes, but any idea how to do this for residential multifamily in the Phoenix metro area? Does such a rate even exists?
I've own a 4-unit for the past 2.5 years but I obviously cannot use the values I've experienced since they have been too large for extending out over a set period of time.
I am trying to project ROI and not sure what numbers to put into the value section of my property in 5 to 10 years.
MF value is dependent more on the cash flow provided than anything else.
Probably the best bet would be to take a look at comps from the last few years for the property you're using this appreciation figure for.
For example, if you're wondering about the appreciation rate for a 20 unit building, you'd look at the sales of similar properties over the past five years to get an average appreciation rate over that time.
It's important to consider similar properties because the market for a 100 unit complex is much different than the market for a 20 unit complex (sophistication of buyer and price range being the big differentiators).
Also keep in mind that your fourplex is a residential multifamily property, not commercial. So it's value is more dependent on the comps than income like a commercial property.
Plus, you're also going to have to take the different areas of Phoenix into consideration, as a fourplex in Scottsdale is certainly going to cost a lot more and appreciate at a different rate than a fourplex in Glendale.
I can give you this data though, and hopefully it helps. If you give address or location I can get a lot more accurate:
- In 2015, there were 269 fourplexes sold in Maricopa county for a median sales price of $182k.
- So far in 2018, there have been 136 sold fourplexes in Maricopa county for a median sales price of $295k.
Using that figure, the yearly appreciation rate for fourplexes as a whole in Maricopa county has been 17%.
You'd probably want to get the figure for the last year to really narrow it down, that way you take any bounce back from the recession out of the equation completely.
(I did it for you... it's 11% appreciation for same timeframe last year).
Also keep in mind that Phoenix has been a quarterly top 10 market for rent growth as of late, and that is certainly affecting residential multifamily values.
That all being said, can you count on 17% annual appreciation an expect to sell than $295k fourplex for $646k in 5 years?
It'll slow down as it gets higher, because unless rents increase along with it to make it a valid investment for most buyers who are using leverage, the demand will drop.
Hope this information helps you with your calculations :-)
Let me know if there's any more research you'd like me to do for you!