Single family vs multi-family pricing efficiency

[Jon Wisniewski]

Hello,

I don't own any property yet but have recently completed a certificate in CRE valuation. I intend to use this knowledge to find a property with a healthy levered IRR for long term investment. That is my goal.

That said, I am in the New York city area and would like to use a VA loan. That limits my property type to condos (fairly rare in NYC, most are Co-Ops) OR multifamily properties (4 units or less) in the outer boroughs. For the purposes of this post, let's assume I can ONLY invest in the NYC area.

With all that in mind, I wanted to ask the community: which properties are price more efficiently in "hot" markets: single family (like condos) or multifamily properties? I am noticing when I run Condos through the DCF process, they are WAY overpriced right now (30% premium). I am guessing this is due to interest rates being so low and general housing market demand. BUT when I run a multifamily through the DCF, they're priced much closer to what the DCF says I should pay, given the same expected unlevered IRR. I assume this is because investors will be buying these properties.

Thank you all so much for your help!