Determining value of multifamily property

[Ryan Magnano]

Hey, everyone.
I've been thinking of purchasing my first investment property nearby, in the town of Holly Hill.

The property has great cashflow, and all seperate meters. Its a triplex that brings in about 2,400 a month. They are selling it around 190,000 in good condition. They are willing to owner finance with terms that rival what banks are offering, but without the closing costs. (The reason is that the seller is old and wants to start selling off his properties and holding notes)

The problem is, I can't find any good comps to compare it to within a couple miles. I also can't find any properties that were producing as much income when they were sold. Unfortunately, not one multifamily between 2 and 4 units has sold for as much as this property in the last year (atleast on the MLS), which makes me nervous.

Truthfully the price is very high for the area, in general and especially based on square footage. But the cashflow is also very solid.

What is everyones thoughts? I think the cashflow totally justifies the price, but at the same time I'm very nervous that the price is very high for the area, and it may be hard to sell for what I'd be paying for it down the line.

I know a lot of people don't care about comps, and valuate properties based on cashflow, but I know a lot of people also rely on comps.

Bascially, short and sweet, based on cashflow the property beats pretty much everything on the market in that price range, but the property costs more than pretty much anything sold within 2 miles in the last year, and is priced very high per square foot. It is an extremely hot market.

Would you purchase a deal like this?

[Michael Swan]

4 units or less are valued based on comps. That's why the seller wants to carry the note. He does not want to let it go based on the comps. You should only pay what the comps are. If this was a commercial Apartment complex 5 units or more, then the sale price would be primarily based on the NOI.

Not a good deal for you. Great deal for the seller if you fall for it.

Swanny