All Forum Posts by: Ryan Weddle

Thanks @Omar Khan. I wouldn't put much stock in GRM either for the reasons you state, just wondering if that part of the book was out of touch or maybe out of date.

What's surprising to me is that valuing small properties using only comps should be even *worse* than GRM, since comps don't explicitly consider expense *or* income. To take your example a step further, with a strictly comps basis you could have a 4-unit property with the lowest rent and highest expenses in the neighborhood, but everyone values it the same as the "average" 4-unit property in the area.

If that's really how it's done, though, I will continue looking at the metrics that I think matter (IRR, cap rate, cash flow) and recognize that others will be pricing on different metrics. Maybe doing that will push me to focus on a different property type or maybe it will lead me to some interesting finds!

Thanks everyone for the replies! @Scott Skinger, @Hadar Orkibi, @Rod Khleif, @Omar Khan, @Gino Barbaro

I get the risk premium approach inherent in using cap rates (I'm an actuary at an investments firm :-) and using them for large MFHs, which are primarily investment vehicles. 

And I get using comps for SFH - they are primarily not sold as investment vehicles.

Learning that 2-4 units (or maybe a bit larger) are generally valued using comps seems to set up the potential for market inefficiencies. Which are always intriguing...

One follow-up. In "What every real estate investor needs to know about cash flow..." Gallinelli talks about these smaller properties being valued using Gross Rent Multipliers as well as comps. While GRM is a type of comp, it's sort of a hybrid between an investment return measure like cap rates (since it at least considers income, though not expenses) and a strict comp measure like price per unit. Since no one has mentioned it, should I take it that those replying don't typically see GRM used in valuing small MFHs?

Thanks again, this is extremely helpful!

Hi all - I read the most recent CBRE cap rate survey, and was wondering how you think cap rates for multifamily properties in the Louisville area compare to the most comparable cities in the survey? For comparison, Cincinnati, St. Louis and Indianapolis are Tier 3 in the survey, and are shown with cap rates of 5.5%-6.75% for stabilized class B, and 6.75% to 8.0% for class C.

Is that about right for Louisville too? And do you think property size would have much impact (i.e., 4 units vs 50 units)?

Thanks!

Hi all, new investor here, learning how to value properties. I read the most recent CBRE cap rate survey and a few other sources for cap rate information. It seems those surveys are typically focused on larger multifamily properties (naturally - I can't imagine the garbage data you would get trying to put that info together for every 4-flat that sells).

So I'm wondering how you think those cap rates translate to smaller properties. For example, Class B cap rates in Indianapolis are shown as 5.5-5.75%. I would think cap rates on smaller properties would be slightly higher for reasons similar to suburban rates being slightly higher than infill, and Tier 3 cities being higher than Tier 2. Is that the case? And if so, what type of spread would you expect to see for a 4 or 8 unit building vs the survey rate? 

And as I hinted at with the "garbage data" comment above, I understand there will be a ton of variance in cap rates for small properties, but I am still very interested in your thoughts on the question.

Thanks!

 Thanks for reminding me to add a clarification Account Closed  - we are currently looking for our first property, so while we plan to be working with PMs who are great with 20+ units in 3 years or so, for now we are looking for someone who will take on a single 2-4 unit property. And hopefully they can grow with us! 

And I realize you didn't say he was exclusively 20+, so we will reach out to him as well, just wanted to clarify for anyone else reading.

Thanks @Jordan Moorhead!

(not sure what I'm doing wrong with the tags but thanks!)

Thanks @Pavel Reyes Valdes , we will!

Hi all, so excited to post in this subforum! We are a married couple living in Chicago and are looking to begin real estate investing in the Louisville and/or Southern Indiana areas. We're both from KY originally and have family in Louisville.  We have been educating ourselves and are reaching out to various people both here and in KY about the process. 

We are currently interviewing property management companies. Does anyone have a good referral for a reliable, experienced PM company in the Louisville area?

Thanks!