Determinig the value of Multi-family properties

[Christopher B.]

I am looking at purchasing Multi-family properties where the numbers work, they cash flow just over $100 per unit, and meet the 2% rule, however for at least one of them, and for other in the future, I would like to utilize the BRRRR technique, which means it is very important that I know the approximate value the property will appraise for. I think I am good at using comparable sold properties, and a little bit of pending and for sale properties, for determining single and maybe 2-family/duplex properties, but for a 4-unit and 5-unit property, I not coming up with good data. I know the 5-unit property will need a commercial loan, and I may not use BRRRR there, but I still need to know the approximate value of the property.

Please share your guidance.  

Thanks in advance.  

[Joseph Gozlan]

@Christopher B. the 4 units will have to be evaluated using comps because that's what the appraiser will have to do if you go to refinance it using a conventional/FHA loan.

If you don't have enough comps, you can do one of 3 things:

1) extend the radius

2) look at singles/duplexes in the area and extrapolate based on price per unit where the more units you have in the property, the lower the price per door

3) Extend the period of time you're searching to a full year or even two years back.

The 5+ units are held to a commercial appraisal rules and it will be income based. I have created a short blog post about how to valuate a MF property (commercial). You can find it here: How to determine the value of a multifamily?

Hope this helps. 

If you have specific questions, feel free to ask.