How to value a multi-family apartment

[Brian C.]

I'm currently looking at an 8-unit Multifamily property and I'm having trouble determining the best way to value the property and my offer price. Which of the following amounts should I apply the local CAP rate to? 1) the NOI from the actual 2015 financials? 2) the NOI from the actual 2015 financials adjusted for an increase in property taxes based on the asking price? 3) or NOI by starting with the latest rent roll, apply the local vacancy %, use the new property taxes, use actual insurance and utilities from the 2015 financials, estimate annual maintenance of $500-$700 per unit, include annual replacement reserves of $200 per unit and include a 4-8% property management fee based on size and location? My concern with #3 is what if the actual 2015 NOI, in #1 or #2, is lower than my estimate? Does it make sense to pay more because I can operate it more efficiently or the rents were just recently raised? Thanks!

[Sarah Ziehr]

I would look at the actual 2015 figures, and figure out if you are good with that NOI and current cap rate.

The problem with this is the figures may just be estimated.  

The bigger question is what are other units in this area selling for currently? Are the current rents at market value? How familiar are you with the area? These are key indicators I would want to know before moving forward with a purchase.