All Forum Posts by: Matt Kauffman

Hey George, I'm sort of in your spot, maybe  a few units behind. The larger I grow my unit size the more I understand that things work better with more units. I too would like to step up, the biggest reason being that I will have more control over the appreciation of the building. Obviously financing changes over 4 units, but as I've been evaluating deals larger than 4, the financing hasn't been the deal breaker as much as sellers thinking their property is worth more than it is due to so much deferred maintenance. 

Thanks for the response. I'm going to call the bank and ask some questions about these appraisers. 

Hey BP gang, how do you deal with a MHP appraisal? I just got a quote from the bank on two different appraisers for $2200 and $4400. Since the parks evaluate on an income basis, how is an appraiser going to figure out value if he doesn't have any financials that I'm aware of. I suppose he could request them, but I doubt they'll do the kind of work I'll do on the project to figure out value. Just wondering as that's a decent sized check to write for an appraisal. 

This thread has been incredibly helpful as I've been trying to understand all that is involved in valuing an apartment. One I'm looking at would be a great property due to its location, but due to super low maintenance, no PM, and a lack of CapEx the deal sits about $550k more than what the numbers really say it's worth.

Thanks everyone. I've revised my spreadsheet to reflect the input on CapEx and PM from everyone on how to value these properties.

@Jeff Kehl This was most helpful as I'm trying to figure some of this stuff out. This is the direction I was leaning on what to do. I did not know that the Seller would be providing all money necessary to remedy the deferred maintenance. 

Just to be clear, deferred maintenance in larger multifamily properties would have more to do with roofs, windows, doors, (entrance ways, common areas), parking lots, garages, hvac, appliances etc... as opposed to units needing flooring and paint and new vanities in bathrooms? 

@Phil Christian - That's how I've viewed it but the question remains, do you include Cap Ex as part of the Valuation when determining how much money the property is worth? 

@Hadar Orkibi Thanks for the input. You use some similar numbers as I do. I ran numbers on another 36 unit property that had $3500/yr of maintenance and no PM cost. The broker said the maintenance and PM was done in house as the Seller owned the PM company that did it. I say "So What", money still has to go somewhere, someone is getting paid to do a job somewhere.

@Bill Keast From the appraisal side it would make sense to include it, but when it comes to making offers when those values aren't included the true value of the property is greatly decreased. 

I'm just trying to figure out where to start making offers so that I can get a contract. Once there I know that after due diligence there will be CapEX expenses discovered that need to be addressed in the negotiated price. But I want to try to anticipate those values ahead of time so we're not trying to renegotiate a bunch. No one wants that. 

Hey BP gang, 

I'm wanting to step up into the larger multifamily properties and move away from <4 unit buildings. When it comes to running financials on larger properties I know I need to include PM and CapEx expenses on a monthly basis.

However, when I'm reviewing larger properties financials many of them do not include PM or future Cap Ex savings/expenses (saving money back for a rainy day or new roof, or boiler etc...). So i stick them in the financials they provide me for my evaluation of the place. 

However, when you add PM and CapEx savings to the Operating expenses it drops your NOI tremendously and then when you multiply it by the Cap Rate you get a much lower valuation of the property than the listing price.

For Example a 12 unit I'm evaluation is listed for $422K, but my valuation without PM and Cap Ex in the NOI makes it worth about $373K. But if I subtract PM and CapEx from the NOI it only values at $324K. This is a 12% Cap place according to the Broker.

Which is the true valuation for figuring out where to start making offers on the place? Do you include PM and CapEx in the valuation or leave it out?

Hi Tim,  Can you get me some more financial info on this place? I love North Canton and would like to have some more properties there. 

Hi Tim, what else can you tell me about these properties? I'm looking for 10-40 unit multifamily properties in Stark county or the Green Area. I prefer locations in Plain, Jackson, Lake, & North Canton schools. Nothing in Massillon, Alliance, or Canton city schools. 

@Anthony Reyes Hey Tony, Welcome to the site. I highly recommend the books, podcasts, and forms.