Good Rent Revenue Multiplier on a 4 Plex
Hi all,
I'm currently evaluating my first fourplex. When determining my purchase price, should I be placing more weight on the cap rate or rent revenue multiplier? If the latter, what would be a good RRM? Below are some bullets on the deal:
Property type -- Four plex (all 2BD/1BA).
Year built: 1915
Location: Kansas City, MO. Midtown/Hyde Park area. Older, dense infill, gentrifying. B/B- location
Avg Unit size -- 850 SF
In place Rent -- $640
Cap Rate: 7.0%
Rent Rev Multiplier: 6.98x
The 7.0% cap rate seems tight, but I don't have a feel for where RRM should be.
Appreciate your input.
Regards,
John
Most Popular Reply
Value the property based on its income and expenses, despite how others lean on GRM or cap rates. Yes they can give you a general idea of the market and what others are willing to accept, but value it based on what YOU need.
Back into your purchase price based on the buildings specifics and the return metric that best fits your needs ie. COC, Rental Yield, IRR.