How to Calculate Purchase Price of Multifamily?

[Therese V.]

All of our current rentals are single family homes. We want to branch out to multi-family. There aren't many available for sale or recently sold to do the same kind of comp analysis that we've done for single family homes in the past. How do you calculate your purchase price for a multifamily?

One method I have considered is factoring the price by door. So, if we're looking at a 5 unit building with 1 bedroom units compare that to 5 SFH with 1 bedroom, does that make sense?

Another method is purely on rents for the area, so if a 1 bedroom can rent for $1300 and there are 5 units then you can go from there to figure out your max purchase price. Seems like a better method, but the market is so tight right now that people are listing so high (and some paying even higher).

Are you using some sort of cap rate or similar value to help determine any of this? Any additional insight is greatly appreciated!