Comping Out A 3 Family In A Two Family Area

[Joseph Cameron]

I am aware that with multi-family, ROI is key. However, given that residential real estate value is based on ARV, I am struggling to find comps on a rented 3 fam property that seems to be under-performing. Avg rents in the area indicate that we could get 50% more income but I'm unsure of my assessment.

Here are the specs:

3 Fam, 8 bed, 4 bath (2 x 3/1 duplex in front + 2/1 flat at the back), 2208 Sq ft, built in 1900 on a 3123 sqft lot. Currently rented at +- 4k monthly but avg rent for 2/1 in the area is 2300-2700.

[Evan Polaski]

@Joseph Cameron  One option would be to put your proforma numbers together and apply a discounted cash flow analysis to back into a value.  Do you need to renovate the units to get 50% more rent or is it just the current owner doesn't care and is making it easy on themselves?

I would also us the current rents and do a gross monthly rent multiplier based on other 2 family comps, and see what you get.  i.e. 2 family comps are getting 120x gross monthly rent.  Take the in-place rents of the property you are looking at and apply the same multiple for a valuation.

At least in Cincinnati, the challenge with any 2-3-4 family is you are competing against other investors, often with no experience, and owner-occupants who will pay a premium for the property.