ARV For 12 Unit Apartment Building
I am considering purchasing a 12-unit apartment building that has been totally gutted.
Due to its size, there are limited comparables in the area to use. Other than paying for an appraisal and base estimates using (NOI * 10), is there a way to determine what this building would be appraised at once I have rehabbed it? The building will cash flow nicely once done, but I want to limit the amount of my $ that will need to be tied up.
Thank you.
calculate the cap rate (capitalization rate) for what buildings in similar age & area are selling for. Even if the sizes of buildings of the comps are different you will find a range that is a good indicator of value.
Thank you,
I will take another look at the comps.
Also, is there a "standard" cap rate that lenders use? If not one single standard, is a 10% a good jumping off point to use.
Cap is by far the best and the most widly accepted method. You'll have to make some assumptions about the income and expenses. Call around and find out what the going cap rates are for multi's.
You may want to call your county assessors office and talk to the commercial appraiser. Tell them the size, location, age, and condition, and they should be able to give you another opinion of its value.
Check properties that are in the same area for price per sq. foot. Find properties with similar unit size and shape (6-20 units perhaps) and compare the price per unit.
Call a commercial RE agent and ask those questions as if you were a prospective buyer. [ Edited by hibby76 on Date 02/23/2004 ]
Thanks.
Great suggestions. I have certainly scoured the listings at similar sized buildings. I have had to do approximate comparable values since all of these units would be completely remodeled.
I will call the county, though. Hadn't thought of that. That should help.
Thanks again.