A Commercial property such as an apartment complex is usually valued on the income that it produces. In its most basic and simple form for example- a 10 unit complex that each unit produced $500 in rent a month would at 90% occupancy bring in 4500 a month. 4500 a month times 12 months would be 54000 a year in Gross income. You would then subtract the costs...for this example we'll say 40%. So for maintenance, insurance, property management, advertising, landscaping, etc.. this leaves 32400 of Net Operating Income(the money left over after expenses, but not the mortgage payments) This NOI then is multiplied depending on the cap rate. For simplistic sake in this example, I'll use a 10 Cap. So multiplying 32400 by 10, this property would be valued at $324000.
so to value a property you'll need to see its current rent rolls, its expenses, really all of its books.
Is this property occupied, or vacant? I have owned multi family in the past and really there is a lot to consider in valuing a multi family property. You may have been given pro-forma numbers for instance. This is, we expect the property can do this well. If the price is set using pro-forma (made up, yet possible numbers) then the price does not reflect what the property is ACTUALLY performing at. I would love to speak to you about this. I made many mistakes my 1st jump into multi-family apartments and Iâ€™d enjoy an opportunity to help someone avoid the mistakes that Iâ€™ve made and learned from the hard way.
Please contact me with any questions.
J. Aaron Sims
(205)834-0798 Call or Text
Weichert Realtors, Access Realty... more