What’s the new gross rental multiplier in smokies?

[John Carbone]

When rates were low, I know properties were trading up to a 10x multiple for gross rental income around here.

Does anyone know what is actually selling and at what multiple and are there still cash buyers with over a million?

looking to see what kind of interest and multiple a property at 160-170k in gross revenues would bring in (including cleaning fees but excluding taxes)

Prospective property is booked out for June and most of July so there is no firesale due to declining rental income just curious what experienced people in this market think a cash buyer would pay. 

[Mack Lengel]

Hey @John Carbone I'll take a crack at this one!

Just went on the MLS and pulled the data for this:

In the past 3 months of sales for properties with a list price of 1.6m-1.7m (going off that 10x), there were 6 closed sales. For a total list price of $10,073,000.

The actual sales price for those 6 came out to $97,880,000.

Based on that it shows that they sold for 97.17% of the list price or just a bit under the 10x multiple.

Note: Here's where my calculations are a bit skewed. 1. This math does not account for all of the original list prices before price reductions on these properties if they had them 2. I only filtered based on list prices of 1.6-1.7, if I were to go thru every listing remark, rental history, or projections then we would have a greater sample size and thus be subject to change.  3. Because I only looked at properties with a 10x multiple of 160-170k a year then I may have missed out on some properties that sold at a higher or lower multiple based on the individual revenues.

Cash buyers don't have to worry about rate buydowns, monthly payments, etc that non-cash buyers do to make their numbers work. There are also other factors in determining what makes a good deal for them such as needing to reinvest from a 1031 or buy for a cost seg to reduce a tax bill. Cash buyers have the ability to make the decision that best fits them rather than just making it cash flow. With all that being said if it is a solid property that will continue to generate good income then it makes sense from my perspective.

I hope all that somewhat answered your question and if not feel free to reach out and I would be happy to look further into it for you!