Appraising a multi-family (BRRR)

[Eric Sammons]

Hello,

I've been a SFH investor for a few years now, and I'm pretty confident in my ability to know how to determine the ARV of a single-family home. However, I'm now starting to look at some duplexes and quads, and I'd like to BRRR them, but I'm not sure how to guess the ARV. I know that appraisals on multi-families are often based on the rental income they produce, but I'm not sure of the formula typically used by an appraiser.

For example, I'm looking at a duplex which I believe could generate $1,350/month after it is fixed up. Does an appraiser only look at that number to determine the value of the house, and if so, how does he calculate it from that number? Or does he also find comps of other duplexes in the area? (In this case, there are only a couple of duplexes in the neighborhood, and they last sold so long ago that the sale price isn't even listed in the county records, although Zillow zestimates them in the $140k range.)

Thanks for any assistance you can give.

[Lee Yoder]

Hey @Eric Sammons, actually duplexes, triplexes and quads are appraised just like single family homes- based on comps. These smalls multifamily buildings are still considered residential. You can get a residential loan when purchasing them, and they are priced like a SFH, not based on income. This can be a negative, because you have much less control over the value. Five units and up are valued based on the NOI- net operating income (income - expenses (excluding the mortgage)).