Analyzing a Multifamily Building to Calculate the Value
How to Calculate the Financials and Cap Rates on a Residential Multi-Family Property. Copy this formula, plug in the numbers and see how much a Multi Family building might be worth, depending on the type of market you're in.
In this video we present the formulas involved, the definition of terms used and examples where we go through all the financials and show you how it's done.
Timestamps:
0:00 - 0:14 Introduction
0:14 - 0:24 How to Calculate CAP Rates
0:24 - 0:35 Calculate the Value of Property
0:35 - 0:53 Gross Income Multiplier
0:53 - 1:05 NET Income Multiplier
1:05 - 1:35 Scheduled Rental Income
1:35 - 1:58 Effective Rental Income
1:58 - 3:23 Example Scenario calculate the NOI
3:23 - 5:16 Full calculations for Example scenario
5:16 - 6:04 Determining the ROI for Example scenario
Patrick Walchuk shows you the ways that you can find out how much any Income Property is worth based on what you are looking for. Are you looking for a certain Cap Rate, Cash Flow or Return on Investment?
Common terms you'll find in the video are: Cap Rates, Operating Expense Ratio, Effective Rental Income, Net Operating Income and more, we give you the calculations to find each.
1. The Cap Rate is simply the Net Operating Income divided by the Selling Price.
2. To work out the VALUE of a building you divide the Net Operating Income by the Cap Rate
3. Find the Operating Expense Ratio by dividing the Total Operating Expenses by the Effective Rental Income
4. To find out how many times a building sold for, multiplied by the Gross Income you would divide the Selling Price by the Effective Rental Income
5. To work out how many times the Net Income a building sold for you divide the Selling Price by the Net Operating Income
Plug in these numbers, don't forget to allow for maintenance and bad debt, as these are real! Allow for a 35% downpayment to get yourself a positive cash flow.... (sometimes).
Use the info in this movie to do your own calculations to find out the Cap Rate, cash flow or the return on your investment to see if it makes sense on any property you have all the financials on.
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#multifamily #appraisal #ottawa #value #financials #caprate #analyzeproperty
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Buying multifamily is the best thing anyone can do. I was able to buy over 100 rental units in Southern California by adding value to properties and trading up. I do not come from money and all I want people to know, is that anything is possible in Real Estate.
I love this
He said movie 😆
The math is wrong. Cap rate is actually 4.153% and if you divide NOI by the cap rate, the value is the same as the sale price. The video shows that the value is of 911,707 when it should actually be of 900,000.
@PatrickWalchuk
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The cap rate in the video is shown as 4.15%. Using this the value is $900,722.
There is no reason for an investor to try to calculate a cap rate. Why waste time doing this if you have the market value?
@PatrickWalchuk
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Because Cap Rates allow an objective comparison between buildings of different sizes, revenues, and expenses, regardless of their Annual Debt Service, if any. It is also one of a number of data points used to compare one property to another. Some of the others are gross and net multipliers and operating expense ratios, etc. These are used in the comparative financial analysis of multi unit properties.
@Walina-gv9ph
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@@PatrickWalchuk NOPE! If you are comparing properties for sale but using the "asking price" to calculate a cap rate for "comparison" purposes then all you are comparing is the asking price. Seriously, why compare asking prices unless you always offer asking?! Not a good way to invest. Used correctly you get cap rate comps from sold similar properties and educate the seller why his asking price is a joke. You should know this.
@PatrickWalchuk
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@@Walina-gv9ph I'm sorry you fail to understand this. I've sold 85 apartment buildings, have 32 years experience and have taken bank appraisal method courses, so I do have some understanding of what I am doing.
@Walina-gv9ph
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@@PatrickWalchuk Instead of "saying" you know what you are talking about why not just "show" us. Everything you have stated so far is 100% incorrect. I say you can't.
@AgentInOttawa
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@@Walina-gv9ph The numbers are based on SOLD Prices, not asking prices.