Multifamily brochures w/ no listing price ?

Question

BP

When evaluating multifamily commercial apartments what is the best way to determine the value of the property if the financials aren't given?

I know by using the gross potential income divided by the cap rate would give me the value I'm looking for. Are there any other ways to determine value if the listing price is not given in the brochure?

Tj Hines · Answer

@Chris Tracy Thanks. This is what I've been doing just so I can get a value.

Tj Hines · Answer

Brent M. Yeah I'm down here in Florida seems like that is common not having a listing price on the offering. Guess they are trying to figure out what the market is willing to pay. I'm using the 50% rule as well.

Thanks

Tj Hines · Answer

Gotcha .. @Joseph Gozlan   Thanks

Joseph Gozlan · Answer

@Tj Hines there is no difference between the NDA and the CA, it's a broker preference, some will use one or the other.

If a broker doesn't give you financials after you sign the NDA/CA then I'd say something is fishy or you're dealing with a "shoe box" owners and that can make the financing obtaining a lot harder because you can't prove to the bank anything.

Tj Hines · Answer

@Joseph Gozlan  Thanks for the insight. I will keep this in mind. Should I request from the broker just to sign a NDA agreement instead of a CA agreement ?

Chris Tracy · Answer

@Tj Hines- Just ask the broker, "What do you think this property will trade at?"

Joseph Gozlan · Answer

@Tj Hines did you talk with the broker?

Most brokers will put out there a "teaser" package and in order to see the full OM with the numbers they will have you provide your details and sign an NDA agreement.

It's used as yet another filter against tire kickers.

Tony Talamas · Answer

TJ – The two ways to value are by using income approach and sales comparisons. Income approach simply takes the subject’s NOI and market cap rates into consideration. Remember to consider market expenses. The sales approach looks at similar properties and compares the value per unit. Do you know at what price similar properties trade? I agree with the prior comments. You should be provided financials; otherwise you’re making assumptions based on the submarket, the age & condition and so much more. Without financials, no one should be offended by a low offer. If you do proceed, definitely get a property condition report performed by a qualified multifamily inspector.

Tj Hines · Answer

@Nick B. Thanks for the insight

Tj Hines · Answer

@Michael Le  Thanks. Yeah that's what I've been noticing.