4 unit multi family

[App601]

I am appraising a 4 unit property . I could find only 2 similar comparable sales and intend to include a 3 unit comparable. There are some possible adjustments that could be performed lie for example capitalizing the estimated rent of one unit, But hat would be mixing 2 approached. Another is by adjusting for GLA assuming the 3 unit is smaller than the 4 unit
A possibility is to go way outside the immediate neighborhood but I prefer not as it is a different market

Ae there any other suggestions?

Please no insults

 

[Tom D]

It all depends on the 3 unit being smaller, the same size, same room count, etc. I would use that one as the 4th comp for support. You go out as far as you have to, to find a similar 4 unit in your bracket. You get a wacky comp with a lot of adjustments underwriter maybe/maybe no like. You can also do for comps 4,5,6 go back more than a year. Sometimes you find the perfect one back then, and use it as the 4th You don't capitalize on anything on the grid. At the bottom you have 4 approaches to the value. You can play with that.

I would try to find a 3 or 2 unit with a similar room count or GLA, or 4 unit within 5 miles. My big city i will go up to 2 miles. It all works itself out at the bottom with those 4 approaches to value.

 

[J Grant]

You can always do a bit of each approach - a cost approach, as you said an income cap for a 4 unit, and use a 3-unit comp.
I would also look outside the neighborhood,, and adjust for location, if warranted. I find that income properties can be less neighborhood specific since investors want the $...regardless of where it comes from.

 

[Tom D]

Hey J Grant. Nobody understands the 2-4 family form. It does use the grm as a cap rate. Start talking about an income cap rate, you just lost the other 2% who understand the form.

 

[App601]

Hey J Grant. Nobody understands the 2-4 family form. It does use the grm as a cap rate. Start talking about an income cap rate, you just lost the other 2% who understand the form.

Thanks I dont believe in GRM s I would need plenty comparables to see if there is a pattern and select the corrrect one
I am going with direct capitalization based on the rents and see what is yields


BW do any of you guys knows how to write subscripts in the general text adendum?

 

[George Hatch]

GRM/GIM and cap rate does the same thing, albeit at different points of the income stream. Relationship between the income and the price. Use of a factor (GRM/GIM) instead of a rate of return of/on investment (direct capitalization or DCF) won't usually cause a problem unless the expense terms are different among the comparables.

The OP can include a 3un among their comps but give more weight to the 4un comps. As with any situation where the quantity of data is low it pays to look further out in distance and further back in time to see what these properties have been doing so that you're not basing this valuation on a dataset that's so small as to be statistically insignificant. Analyses based on fewer data points can easily suffer more distortion from an outlier.

 

[App601]

It all depends on the 3 unit being smaller, the same size, same room count, etc. I would use that one as the 4th comp for support. You go out as far as you have to, to find a similar 4 unit in your bracket. You get a wacky comp with a lot of adjustments underwriter maybe/maybe no like. You can also do for comps 4,5,6 go back more than a year. Sometimes you find the perfect one back then, and use it as the 4th You don't capitalize on anything on the grid. At the bottom you have 4 approaches to the value. You can play with that.

I would try to find a 3 or 2 unit with a similar room count or GLA, or 4 unit within 5 miles. My big city i will go up to 2 miles. It all works itself out at the bottom with those 4 approaches to value.

Thanks I was able to reconcile the three approaches by number of units using thw weighted average of the 3 comparable sles

However the values per rooms bedrooms and GBA did not But the income and cost approaches did Take care As to me th issue is closed Hope it helps other people

 

[Tom4value]

I am appraising a 4 unit property . I could find only 2 similar comparable sales and intend to include a 3 unit comparable. There are some possible adjustments that could be performed lie for example capitalizing the estimated rent of one unit, But hat would be mixing 2 approached. Another is by adjusting for GLA assuming the 3 unit is smaller than the 4 unit
A possibility is to go way outside the immediate neighborhood but I prefer not as it is a different market

Ae there any other suggestions?

Please no insults

No insults? This is an excellent post!

I assume you are just talking about what to do about the sales comparison approach so I will stick to that. I would say about 95% of my appraisals of 4 family properties results in less than 3 four family comps. The fact that you got a 3 family is great, I try to get one also.

My take is I only adjust for GBA. In the grid of the 3 family comp, under the 4th unit I give a zero. I explain in the comments, “ no adjustment is made for the lack of the 4th comp because the lack of income for the 4th comp is offset by the lower risk of not having a vacant unit. This is supported by the adjusted sales prices not supporting an adjustment.”

 

[TerryRohrer]

No insults? This is an excellent post!

I assume you are just talking about what to do about the sales comparison approach so I will stick to that. I would say about 95% of my appraisals of 4 family properties results in less than 3 four family comps. The fact that you got a 3 family is great, I try to get one also.

My take is I only adjust for GBA. In the grid of the 3 family comp, under the 4th unit I give a zero. I explain in the comments, “ no adjustment is made for the lack of the 4th comp because the lack of income for the 4th comp is offset by the lower risk of not having a vacant unit. This is supported by the adjusted sales prices not supporting an adjustment.”

Doesn't make a bit of sense, but what the heck, if they buy it!

 

[Fernando]

Doesn't make a bit of sense, but what the heck, if they buy it!

So true, doesn't make sense but that's what the form/client wants us to follow. As long as they buy it, I never had a problem.