Is Multi unit pricing to high?

[BOB CRANEY]

I have been researching recent sales in the Baltimore area for Multi unit apartments from 20-200 units and it seems the per unit pricing is to really high compared to the rent. With properties built in the 1960-1970 that have seen some or all the units renovated, the per unit prices are $85-130,000 for an average size 2BR/1BA with 600-900 sq ft. These are mostly class C to B in older neighborhoods that are renting for 700-1100, usually with only water/sewer included.

Comparing that to the 1-4 units I have been able to find the average cost per unit is $60-85,000 and the sq ft of the units are 700-1200. These are renting for 700-$1200 on the higher end for big apartments with storage, parking and sometimes 2 full BA. Averages in the 900-1050 per month, nothing included.

With the additional costs to manage the higher turnover, larger multi unit buildings, how does it make sense to pay such a premium for a larger unit count? The few large deals I have seen that had much lower per unit costs had a ton of deferred maintenance or very low occupancy and were usually in class D-C areas. I have experience rehabbing and really upgrading properties for sale and rent but you cannot singlehandedly change the flavor of an area just by making it an Oasis in the desert.

What would be a conservative unit cost to rent ratio that would signal a good deal, using a safe 50% for expenses.