Do You Comp Properties Based On Income Or Assessed Value?

[Tony Nguyen]

Hey guys,

If an apartment building brought in $42,000+ gross a year, but was assessed at $80,000 per tax records, would you buy based off the $42k+ gross income or the $80k tax assessment?

Thanks a bunch :cool:

[Jon Holdman]

I'd never buy based on a tax assessment, period. Those are created for the purpose of collecting taxes, not selling.

Apartments are usually valued using the income method, which will be based on some (typically inflated) net operating income and some local cap rate. But I do see listings, on loop net, for example, where other recent sales are offered as a way to justify the price.

I'd value them based on what its worth to you. Consisder the info provided by the seller but make your own determination of NOI. Apply your own financing terms and see what return you're getting. Adjust the price to an acceptable price that gets you the return you what.

Now, you certainly don't want to pay above market. And you want to factor any repairs and lost rent if you have to take time to fill up a vacant or partially vacant property. And if your value is 25% of the asking price, you're probably not going to come to an agreement.