Multifamily Appraisal

Multifamily appraisals of garden and low-rise to high-rise apartments; duplex, triplex and four-plex dwellings; mobile home parks; and RV communities.

An appraisal of multifamily building constitutes a prescribed procedure of determining the fair market value of a property with several residential units. This includes using the three approaches including the Cost Approach, the Sales Comparison Approach, and the Income Approach. Each approach is used for evaluating property-specific attributes, and considers economic indicators, income derived from rent, and vacancy rates to estimate the multifamily property value.

 

Key components of a multifamily appraisal 

The Cost Approach is used to estimate the value by estimating what it costs to reproduce or replace the building improvements, and then deducting the depreciation, and finally, adding in the land value. The Cost Approach is almost always used for newer properties and can also be used for older properties as well.

 

The Sales Comparison Approach is used to analyze similar multifamily properties that sold recently, located in similar areas, by making adjustments for differences in various elements, including number of units, size of the units, age/condition, location, quality, etc.

 

The Income Approach is used by the appraiser to estimate the value based on the income-producing potential. Factors such as rental rates, vacancy rates, and operating expenses are incorporated into the valuation to determine the net operating income (NOI). The NOI is then divided by a capitalization rate (also called cap rate), which is the expected rate of return on the property, to determine a final value indication.