How do you price an apartment building off rent.

[Shaheed Crier]

I'm looking at a 9 unit building. All one bedroom units Monthly rent is $7450 annually $89,400 Building age 46 +/- 1 Cap rate 5.22% Asking price $989,505 How do you use the rental price to get to a building value? Thanks for your help in advance.

[Jeff Filali]

@Shaheed Crier Asking price it too high unless you could raise the rents by 33%.  If it doesn't need any repairs, its worth between $372,500-$745,00.  The fastest way to run the numbers on the go on multi-unit rentals before digging in deep, is simply take the monthly rent ($7,450) and divide by 2% and 1%.  This will give you a general idea of the value range on rentals.  However, before purchasing you would want to run more detailed numbers as mentioned above.  IMO there's too many deals out there that fall within this range to pay more.

For example, I looked at a 24-Unit complex this week the monthly rents are $15,600 and asking price is $1.2M.  So, $15,600 / 2% = $780K and $15,600 / 1% = $1.56M.  They're price is in the ballpark, actually in the 1.3% range.  If I was going to make an offer on this one, I'd probably offer $750K Cash and then negotiate from there.