How to compute value of an apartment building? - Posted by Marv

Real Estate Investing Apartments
1

Posted by Marv on August 24, 2011 at 16:19:17:

What’s the best and/or simplest formula to utilize when trying to compute the value of an apartment building before I make an offer on it?

Would no. of units times cumulative monthly rent times 12 be sufficient?

Thanks!

2

DIY Valuation? Better use my Back-to-School Sale - Posted by ray@lcorn

Posted by ray@lcorn on August 26, 2011 at 08:48:31:

Marv,

You are a seller’s dream… no idea how to value the property and ready to make an offer.

To avoid being a lamb led to slaughter, see this article: “What’s it Worth? Deriving Your Capitalization Rate”, at the direct link http://www.creonline.com/articles/art-216.html

After that, you might want to think about stepping up your knowledge base. Spending some time and less than a $600 on high quality educational materials will save you tens of thousands of dollars, and make hundreds of thousands if you apply even 10% of the strategies presented.

Here’s a link to all of my articles, they’re free: http://www.creonline.com/commercial-real-estate/article-menu.html

Shameless plug–here’s a link to my book, I’m told it’s too cheap: http://www.creonline.com/catalog/b-140.html

Please buy it before you make any offers. I will personally guarantee the material will pay for itself 100 times over.

In fact your post inspires me to do something to help educate people to take control of their lives. I think income producing real estate is one of if not THE best way to do that.

How about a Back-to-School sale? Here’s the deal:

Buy my book by midnight Monday 8/29 and I’ll throw in the Getting Started in Commercial Real Estate DVD & Workbook ($299) and my 2012 Forecast ($79) for free. (see the CRE Online catalog for descriptions)

This is out of the blue, so there won’t be any coupon code or discount mentioned on the order page. (Heads up to Lori!) Just mention this post and send an email to lori@creonline.com after you order.

Best regards,

ray

3

In my opinion I think it is a hard deal to have investment in an apartment building but I guess you have some idea how to handle this so good luck.

Thanks
Regards
Chantell Wilson
Site address:http://www.apartmentcafeteria.com
Apartment Rentals with user reviews, amenities and location Map.

4

Try using the IRV formula:

Income divided by Rate equals Value.

That is, the net operating income divided by the market cap rate is what the property is worth; all else being equal. You still have to factor in repairs, economic conditions, comparable properties condition, and many other things to find the real value.

Example:

You know the NOI is $110,000, you know the market cap rate is 8% and you want to know what the pro-forma value (similar to ARV in residential) you would use this formula…

110,000 / .08 = $1,375,000