Analysis overview, multifamily

[Javier Rosales]

Am reading the Brrrr book.by David Green. And it said with multifamily rentals, I dint pull comps for it. I only analyze it by how much it will rent for and how much positive cash flow I can get from it. So what do I do for the ARV? When the lenders ask me how much will the duplex triplex etc will be worth when remodeled.

P.s am a sailor on a ship. The ships WiFi isn’t that strong out at sea. sorry in advance if I respond late

[Roger Smart]

1 to 4 family homes count as residential sales to your lender, so he will only care about the comps in the area, not the income. They may look at the total rent amount to compare that to other buildings with a similar total rent amount, but value is not based off of NOI (net operating income).

5+ Family apartment buildings fall into multifamily rentals that would be valued based off of NOI because it is a commercial property. A very brief example, property makes $10,000 per year, lender uses a 10% cap rate for that area, then the building is worth $100,000.

TLDR; 1-4 units, residential loans, comps matter. 5+ units, commercial loans, income matters.