Comps with Multi-Family Homes

[Corbin Wafford]

BP,

I am making moves to invest into a MFH home here shortly but wanted to ask those experienced in MFH investing (Duplex to Quadplex), how are you running comps in the area?

I am finding it difficult comparing similar MFH properties to one another as there are multiple variables that do not match up completely. I can't imagine you can compare a duplex to a SFH or a duplex to a triplex/quadplex. Maybe I am wrong. Hence the reason I ask!

Ex) If I find a duplex in an area and within a 5-10 mile radius there are little to no active, pending or closed (past 6 months) properties with similar criteria. How can I effectively pull comps to evaluate whether or not this would be a good deal and determine ARV (as most times, you need this to make the MAO)?

I can surely use my agent to help, but understanding the logic/math behind it would be very helpful so that I can analysis deals more efficiently on my own.

Thanks for the help!

[Ben Wilkins]

@Corbin Wafford - you are correct that anything under 5 units is valued based on local comps.

That said, I always ignore this rule and I base my MAO as if I were buying a commercial property. If you take the expected income and back calculate, you can determine a price for what cap rate (or cash flow) that you are targeting.

This will not work if you are looking to do a BRRRR strategy, since you are basing your purchase on what a bank will refinance (ARV). In this case, I would talk with a local lender to learn how they valuate / appraise a property.

If you want some examples of how I value a MFR based on cash flow or cap rate, let me know and I would be happy to help you out! I'll save you a wall of text unless if you ask for it ;)