How to Calculate RE Deals

[Amir B.]

Hello BP Community,

I was wondering what is the calculation to assess value of a property. For example, there is a MFU property in Fairfield, CA. The asking price is $500,000. All four units are rented out for $900 each. The property tax is $5000. I think it's overpriced. Please help. 

[Account Closed]

You will not be able to find reliable verified cap rate comps for a 4-ples so forget cap rates. If you are familiar with the market rents then it would be easy and more accurate to utilize Gross Rent Multipliers. Gross rents are $43,200. At asking the GRM is 11.57 but you want to find out what similar properties have sold for. Be sure the rent includes the same things as your property. If utilities are included then that needs to be accounted for. So if the market GRM appears to be 10 then the market value would $432,000. You could then make adjustments for differences.