Cap rate important for triplex/4plex?

[Joe Gogal]

Hi BP investors!

I am moving to the DC metro area after graduation in May with plans to house hack a duplex/triplex/4plex as my first property and finance with an FHA loan! It is my understanding that these small multifamily are appraised/evaluated from comps. However, in a high cost of living area like the DMV should I also consider the cap rate for these type of properties during deal analysis? Thanks for any comments or advice.

[Leo Watts]

@Joseph Gogal

You'll want to pull comps on similar properties. Though the MLS categorization of single vs multi is imprecise in DC. Sometimes you'll see a single family with an illegal basement unit listed as a multi or a row house that COULD be converted to MF that's actually just a single family listed as multi family or even listed both as a MF and a single family. I've also seen some duplexes that aren't really triplexes listed as triplexes, or recently a single family listed as a triplex with no permitted work done and lots of non up to code work. Interestingly, square foot wise, I've seen some neighborhoods where single families are selling for more than duplexes of similar sizes. The buyer pool for single families is larger than for MF. There's a lot of nuance and redundancy in DC zoning codes as it pertains to single vs multi family. The majority of single family homes in the district can be converted to duplexes (two family flat) or can have legal ADUs added, but the distinction depends on the underlying zoning.