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Author Topic: Help finding out a multifamily property's price?  (Read 2278 times)

Offline omcarroll

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Help finding out a multifamily property's price?
« on: November 03, 2011, 10:11:45 pm »
If I do not have the asking price on a property because the owner really doesn't know how much to sell it for. How can I come up with a price if I do not have the cap rate or the GRM on the property? All I have is Gross Operating Income and Expenses and the occupancy level.  Please help! Thanks.
« Last Edit: November 04, 2011, 02:49:44 pm by omcarroll »

Offline Gold River

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Re: Help finding out a multifamily property's price?
« Reply #1 on: November 04, 2011, 07:38:55 pm »
Hi,

    Very first thing investing in apartment properties, don't assume the financials your presented are factual until you, yourself does your due diligence!!!!
Some sellers or there agents will present numbers that are estimated or have been rounded up or rounded down depending on the numbers impact!

Take income, adjust for vacancy, then deduct all operating expenses including reserves, this number should be 50% or a little more, the cash left over is your NOI (Net Operating Income) divide the cap rate into the NOI = Value!!!

NOI - $100,000
Cap - 10
Value = $1,000,000

Cap rate = Net Operating Income divided by Price.
Price = Net operating income divided by cap rate.

Generally speaking, there are four classes of property for apartments (A, B, C, or D) that will help determine the Cap Rate you use:

Class A- Built within the past 10 years or so; good quality renters with good jobs; very little maintenance / repair issues. General Cap Rate range will be between 5-7%.

Class B- Built within the past 20 years or so; tenants mix of white and blue collar and has some deferred maint / repairs. General Cap Rate range will be between 7-9%.

Class C- Built within past 30 years or so; tenants mix of mainly blue collar workers & subsidized housing and has maint / repairs. Tenants may be renters for life. General Cap Rate range will be between 10-12%.

Class D- Built 30 years plus, usually found in bad areas filled with bad tenants. If a class D property is in a class A or a class B area, you may reposition to higher Cap Rate. General Cap Rate range will be 12% or more.

These are general cap rate guidelines, your state, county, city and area will reflect slightly differently!


                           GR
 
« Last Edit: November 04, 2011, 07:42:09 pm by Gold River »

Offline omcarroll

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Re: Help finding out a multifamily property's price?
« Reply #2 on: November 05, 2011, 05:16:14 pm »
Thanks very much.

Offline Faye2012

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Re: Help finding out a multifamily property's price?
« Reply #3 on: December 06, 2011, 08:31:34 pm »
Good Job Gold River!!!

Offline jass

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Re: Help finding out a multifamily property's price?
« Reply #4 on: December 17, 2011, 03:58:36 am »
thanks, i read this  post you provide the best information about multifamily property's price.

 




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