Determining Duplex Values Before Making Offers
Good Day!
I am looking to buy a duplex or tri/quad that I can live in and rent the other units out. There aren't many comps because these small multi-units don't turn over much. What I am going to do is buy a property to rehab and hold, so the value will increase with the work I do. My question is, with so few comps - how do I accurately determine before and after values without going to an appraiser? Want to be able to quickly run numbers! I do know a lot about what the rents are...
Okay,
There are several types of comp methods, the most accurate of course is the comparison of like sales. You can also determine the cost to build a duplex by working through the costs per square foot to build in your area. But you have to also factor in the amenities and fixtures you be providing. You could ask a general contactor friend what the rough cost per foot are for builiding duplexes in your area.
If you can't do comps you can look at it from a revenue basis. A very general formula is multiply gross rents times 100. That is the max you want to pay. Now, because it is a formula, it only a very quick and dirty technique. You will of course really want to add in vacancy rates for your area (higher in duplexes and fourplexes), repair costs, insurance, taxes, etc. Based off of these number for your area, you can at least determine the maximum that you could pay and still generate positive cash flow.
Have you looked for comps in a wider radius?
HTH,
Robert
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