Wholesaling multi family

[La'Terrius Campbell]

How do you figure out a ARV for a multi-family property? I know how to comp single families by comparing them to similar homes in that area, but how do you figure out a ARV on multi-family properties? Any comment will be extremely helpful.

[Aaron W.]

Originally posted by @Harmonie Borden:

AJ

I'm rather new at this and trying to get a better grasp on the financial calculations. Why in your scenario would the cap rate now just be 8.4%? I know that in commercial properties valuation you look more at the income that the property can generate but still not 100% sure how each of the calculations can be interchanged so easily. How does loss to lease tie as in your example impact the property value? 

Hi Chris-I'm not sure where you got the 8.4% cap. However, the increase in the value of the property came in the form of increasing the NOI. It went from $100k to $120k which is a $20k increase, and valuing a property at a 7% cap rate increases the value an additional $285,714 ($20k/7%). This shows why in value add scenarios, finding ways to increase the NOI is so valuable.

Loss to lease is subtracted from the gross rent numbers before subtracting operating expenses. When we run our numbers loss to lease, vacancy, concessions, bad debt are subtracted from gross rent which gives us the effective gross income. This EGI is then subtracted from the operating expenses to give us the NOI.

Hope this helps!