Thoughts from Appraiser on Multi-Family Comps

[Tyler Mundy]

I am a commercial and residential real estate appraiser, and I have been listening to a lot of RE investment podcasts lately (including BiggerPockets, which I love). I have heard a couple different people say recently that large multi-family properties are great, because you don't value them with comps. They say that the value is entirely from the net operating income (NOI). However, I would like to put this myth to rest. Yes, the NOI is crucial, but where do you think the cap rate comes from that you apply to the NOI for an opinion of value? Comps! The cap rate should be 100% market derived, which comes from recent comparable sales. In addition, a commercial appraisal will include the sales comparison approach in addition to the income approach. The sales comparison approach is 100% based on comps, and very important in determining market value. Alright, rant over. Thank you for listening.