How to calculate the value of a fourplex

13 Replies

I am a new at this and I am going to see a fourplex that is an REO vacant and need a lot of TLC. I need to calculate the value of the fourplex. Can someone tell me which formula I need to use. Thanks in advance for your help.
Fourplexes are valued on comps. Check zillow for sold not listed like properties to start.

And to continue what @Josh C. was writing, once you have the comps, get an estimate of the repair costs plus 10%, and subtract that from the price, and subtract a little more for bargaining room.

I have gotten estimates of work just by calling around to a few subcontractors (plumber, electrician, clean-the-nicotine-stained-everything guys, carpet guys) before I made an offer. If you do get an accepted offer, I'd have them come out (for free estimates) to give a better idea of what you're looking at, cost wise. My offer wasn't accepted. I don't feel bad about this because I knew my numbers for costs (roughly), anything higher would make me lose money or be upside down. 

@Josh C. is correct that fourplexes are valued based on comps because they are still considered residential properties. But I really don't consider them as residential properties for a couple of reasons.

  • They don't sell as quickly as SFH. The marketability of these is mostly to investors only.
  • They are income producing, so I am basing my offer strictly on how much money they can make me. 

I actually like fourplexes because you can get them using conventional financing, which is a safety net. A lender will never let you overpay for the property based on the appraisal of the property. You prevent yourself from overpaying based on the financials of the property.

As far as formulas to use, there are several resources you can use:

Start with The Ultimate Beginner's Guide to Real Estate Investing then move on to @J Scott's Introduction to Real Estate Investing. I just finished reading Frank Gallinelli's book What Every Real Estate Investor Needs to Know About Cash Flow... and can't tell you how valuable some of the info he has in there will be to me.

This post has been removed.

Originally posted by @Josh C. :
Fourplexes are valued on comps. Check zillow for sold not listed like properties to start.

thank you Josh for your input 

thank you Josh for your input

Originally posted by @Ronald Perich :

@Josh C. 's Introduction to Real Estate Investing. I just finished reading Frank Gallinelli's book What Every Real Estate Investor Needs to Know About Cash Flow... and can't tell you how valuable some of the info he has in there will be to me.

Yes Ronald, that is how I am looking at this property and I am using the GRM or GIM to calculate the value of the property. Thanks for your help

Originally posted by @Matt Slakey :

And to continue what @Josh C. was writing, once you have the comps, get an estimate of the repair costs plus 10%, and subtract that from the price, and subtract a little more for bargaining room.

I have gotten estimates of work just by calling around to a few subcontractors (plumber, electrician, clean-the-nicotine-stained-everything guys, carpet guys) before I made an offer. If you do get an accepted offer, I'd have them come out (for free estimates) to give a better idea of what you're looking at, cost wise. My offer wasn't accepted. I don't feel bad about this because I knew my numbers for costs (roughly), anything higher would make me lose money or be upside down. 

thanks Matt for answering my post.

value depends on whos perception you want to consider because its different for each:

- appraisal value - how appraisers will determine value for the purposes of obtaining a conventional loan on a fourunit is mostly weighed towards comparable approach in my experience even though the appraisers notes say "most weight was given towards income approach," Ive seen this hundreds of times

- subjective value to you as an investor - each investor has their own criteria similar to what others have mentioned above regarding how "they," look at a value

- banks underwriting value - may differ from appraisal value if dealing with local portfolio or commercial lender as they use different metrics to adjust appraisal value or listing price to lend only up to their version of "value,"

- Market/selling value what the market will actually contract at for that given property, sometimes guessed by realtors as a BPO or broker price opinion. Appraisal value lags this because appraisers use past comps and even in MF they use income from past apartment buildings to adjust income and cap rate to determine value.

Why's this important? maybe you need a refinance as an exit strategy, maybe you need to sell, maybe you want a commercial loan after, or etc....

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here