Las Vegas Property Management Blog, the G-Gram

How to Access Value Of Multifamily A Multifamily Investment Property

Thursday, January 31, 2019

Are you interested in investing in multifamily investment properties? If so, the key to success with investing in these types of properties all comes down to accessing their value.

In this article, we will share with you several tips you can use for accessing the value of multifamily investment properties.

A Basic Formula for Accessing Multi-Family Investment Properties

One of the easiest ways to access the value of a potential investment property is by compiling the following information.

  • Taxes 
  • Insurance  
  • Vacancy rates 
  • Possible repairs and property renovations that are needed 
  • Liens on the property  
  • Utilities 
  • Asking price 
  • Financing  
  • Potential property management costs 

After you have this information it’s easy to eliminate potential deals especially if you look at the current expenses for the property. But, as a general rule, a Class C Property, in a C neighborhood, is going to run a 50-55% expense ratio. 

If the current owner of the property tells you that he’s operating at a 25% expense ratio for his type of property, it’s quite possible that something may be off or the owner’s books may not be accurate so in this use caution.

Let’s say that the data doesn’t make sense, and it’s not a “must-have” property, you should just move on to another deal but, on the other hand, if the expenses are greater than 75%, this does not imply that it’s a bad property, it possible that there may be a chance for improving the rental.

Additional Ways to Access the Value of Multifamily Investment Properties

Are you interested in using advanced tools for accessing the value of a multifamily investment property? There are a variety of variety of tools available including financial analysis tools that you can use for analyzing a commercial properties value and acquisition models like the Apartment Acquisition Model with Monte Carlo Simulation created by Spencer Burton.

Some additional methods that you can use for calculating the value of an investment property include: 

Gross Rent Multiplier - You can also access the value of investment property by using the gross rent multiplier. With this method, all you have to do is divide the selling price of investment property by the property’s gross rents.

Sales Comparison Approach – This is the most common approach that’s used in the real estate world today, it simply involves comparing the property that you’re interested in purchasing to similar homes that have sold recently. The average investor will want to see an SCA over a period of time because this will also give them data to spot trends which could potentially arise.

Capital Asset Pricing Model – Searching for a method that’s more unique than the rest? With the (CAPM) model, it will look a potential return on investment that can be derived from the rental income and then compare it to other investments in the world that have no risk.

Contact Us 

Do you have investment properties in Las Vegas that need property management? Contact Blackbird Realty And Management, Inc by calling us at (702) 903-3556 or click here to connect with us through our website. 

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