Valuating property with month-to-month leases

[Anthony Brown]

I am currently looking at purchasing a multi-family property and learned that there are no existing leases, the owner has everyone month-to-month. I had previously valued the property based on stated NOI, have not yet seen rent roll, etc. My question is whether there is a way to discount the value of the property based on the m2m tenants and additional risk of not having long-term leases secured?

[Anthony Angotti]

@Anthony Brown to be honest I would almost pay more at this point to be delivered a property with all M2M leases. It allows you to give them all yearly leases that are your own and get rid of any potential trouble tenants. 

How many units is this? If commercial you'd still value it based on the NOI, but if residential you're going to be looking at just the comps.

You could ask for a discount based on the area vacancy rate applied to the building to account for the risk of having to fill all the units. I wouldn't bank on getting it though.