Why are agents including financials, NOI and cap rate in their li

[Anthony O. Porter]

Why are agents including financials, NOI and cap rate in their listing for duplexes, triplexes and fourplexes to arrive at the property value when the value is based on comparables. My understanding is that financials, NOI and cap rate are only used for 5 units or more (commercials properties) and not residential properties, which is anything less than 5 units.

What are your thoughts?  Thank you!

[Immanuel Sibero]

@Anthony O. Porter

Hi Anthony! You are correct that NOI, Cap Rate valuations are commonly only used for 5 units or more. Single Family Houses, duplexes, triplexes and fourplexes are usually valued using recently sold comparable properties. But NOI and cap rate can be relevant when selling duplexes, triplexes, fourplexes (you would even see them on SFRs listings). This is because oftentimes the potential buyers are not just owner occupants but also investors who would be interested in the financial information.

If you understand (which you appear to) that SFRs, duplexes, triplexes, and fourplexes are commonly valued using comparables then you have an advantage! You know not to overpay just because the NOI and cap rate calculate to a higher value. You would stick to the "comps". This may even be a deliberate trick on the part of the agent to sell to a buyer who doesn't understand fully understand the difference in valuation of residential multifamily (2-4 unit) vs commercial multifamily (5+ unit).

Cheers... Immanuel