Multiplex Comps? ARV?

[Jerry Hodges]

I've recently come across a potential fix and flipper or fix and hold apartment complex. How do I go about calculating comps on a multiplex? How do I determine the ARV? According to cad they are multiple sizes and the bottom used to be a store. They are 3240, 1656, 1584, 540, and 540 sqft.

[Mack Benson]

On a commercial property you don't calculate comps. The value of the property is going to be based on the NOI and the market cap rate for the property type and class. NOI is the income - expenses not including debt service.

Your proforma (this could be thought of as your ARV) can be based on the performance of the property after your business plan has been executed. By saying you plan on flipping it I would assume part of your business plan is to renovate the units and increase the rent. Once you have leases signed you may want it to be stabilized for 3-12 months before marketing it to maximize its value. Most buyers are going to want to see a T12 but some will only want to see a T3. In my market we have brutal winters and hot summers so our expenses tend to fluctuate and I always want to see a T12.

If you are able to increase the income and decrease your expense you can take the cap rate from your purchase +/-.5% and calculate your new value. Whenever I evaluate a property I include a proforma along with the current performance of the property so I have an idea of the properties value after the business plan has been executed.