Valuing (and value adding) small multi in overpriced areas (San Diego)

[Jeff Thompson]

Hi all,

I'm early in the "figure out where we are going" phase and will do a ton more research before doing anything, so my question isn't if this is a good idea for a newbie, the question is: How do I value a small multi-family deal in a "overpriced" area like San Diego and determine the ARV if I'm going to try to make money by forced appreciation? (cuz haha cashflow around here unless you have a huge pile of cash).

Just to have something specific to talk about here's a property: https://redf.in/DxEDC2 - 4-plex of 3/1.5 units listed at $2m and actual NOI of $74k which puts it at a 3.7% cap rate. Projections (rents are under-market and the owner is living in one unit) list a NOI of $126.6k which is a 6.33% cap rate at the list price. The projected numbers listed actually seem rather fair at $2,950 rents where market rates are more like $4,000 if the place was updated.

How should I determine a fair valuation of this place?

Then lets say we rehab the building and get it stabilized at $4,000 rents which is let's say a $170k NOI. What is the value of the place now?

Now lets say run the units as MTR and average $5,000 per month for something like $200k NOI. Did I further increase the value on the property?

Thanks,

Jeff