Appraising 8-unit with half Airbnb units

[Stephen Lassiter]

I've been looking for small multifamily deals. I found an 8-unit where the seller is renting 4 units short-term on Airbnb. The regular long-term units are getting around $400/month while the seller claims the Airbnb units are bringing in $925/month. Using the income approach, do I really include the Airbnb income to value this property? Or would I just use long-term market rents for all units? Of course if I was the seller I'd want it to be valued using the Airbnb income. But from a buyer's perspective, I just want to value it as if all units were getting $400 because I really wasn't intending to operate an Airbnb. Is there a 'standard' when it comes to something like this? How would a building like this be appraised?

[Nathan Emmert]

You have to appraise it how you value you it.  Do you value it at 8 long term rentals for $400/month or do you value it at 8 short term rentals at $925/month or do you value it somewhere in between?

How the seller operates the building is of little use to you.  Remember, a property simply has a value which you're willing to pay, and they are willing to sell.  Sometimes those numbers simply don't intersect.

This really isn't much different than someone saying we're renting the 4 units for "below market value" at $300/month and you can "easily raise the rents" to $450/month and then trying to do their pro forma based on $450 a month.

As for appraisals. Few appraisers care about the income method of valuation (i.e. how much rent the building generates). Most simply go by comparable units, at least in SFH (4 units or less). If you're buying a 2,000 square foot triplex, they would look to see what other triplexes of similar age and square footage sold for even if yours generates 20% higher rents. Commercial properties (5 units and up) are done a bit differently so income may be far more important. Others will be more of an expert in that area.