Multi-family ARV calculation for BRRRR

[Carter Still]

I’m just getting my feet wet in multi-family and Value-add projects. Currently looking at numbers on two duplexes, and would love it if I could pull off the BRRRR, but don’t know how to assess ARV on multi-family. I believe it’s typically based off of income/rents, but my lender says that since these duplexes are vacant we can’t speculate what the rents will be. Therefore he would use past sales of other multi-family as comps. Past sales are pre-renovation prices, and none have popped up as flips since the investors hold them. So no past sale will provide a usable comp to substantiate the ARV. Numbers for 1 of these identical duplexes are below: $180,000 purchase (2580sf) $75,000 renovation $2800/month gross rents SF homes sell for up to $160/SF in this neighborhood The income approach would be... (2800*12*.75)/.08 = $315,000 (if I understand typical calculation correctly) Lender will do 80% LTV with 12 months seasoning. Thank you in advance for any information you can share!

[Cory O'Dell]

"Since these duplexes are vacant we can't speculate what the rents will be." Sounds like malarky to me...determining potential rents in an area really isn't that difficult. Check out what others are renting for and talk to a property manager. They'll be able to tell you about what I can bring in.

Under 5 unit properties are considered residential, so to find an ARV you can just look at comps in the area with similar bed/bath/square ft and compare. It can be trickier if there aren't any with similar updates like you said, but you can always expand your search radius. Your realtor/property manager should be able to help you determine how much more buyers in the area are willing to pay for, say, a 3 bedroom versus 2, or granite countertops versus laminate. Talk with them and see if they can help assess what would be worth upgrading or not. But otherwise, everything you'd need to look at to determine ARV is discussed here:

https://www.biggerpockets.com/renewsblog/2016/04/29/ultimate-guide-quickly-estimating-property-arv/

For determining market value for 5 units and above you can look at this article too:

https://www.biggerpockets.com/renewsblog/2016/07/06/multifamily-real-estate-value/

Good luck with your purchase! We have a SFR in Edmond :)