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• Christina Labowicz

# How Much is my Building Worth?

How to find out how much your property is worth

There are 4 value indicators to determine the value of a 5+ unit apartment building, including:

1. Price per unit

2. Price per square foot

3. Gross Rent Multiplier (GRM) - The ratio of gross annualized rent to the price

4. Capitalization Rate (Cap Rate) - The ratio of the net operating income to the price

By taking a look at 3-5 comps in the subject property’s neighborhood you will see what those properties are selling for in each of these categories. You can find a rough value of your building by averaging each value indicator from the comparable says, and apply those values to your property. You will have 4 different values based on each value indicator. Since your 5+ unit apartment building is an income property, you can use GRM and Cap Rate to account for 60% of the value, and the price per square foot and price per unit to equate for 40% of the value (instead of 25% for each).

Example:

A neighborhood typically sells for a 17 GRM, 3% Cap Rate, \$360/sqft and \$506,000 per unit.

Your building has annual gross income of \$90,000, expenses of \$31,500, is 5 units and 5,000 square foot of rentable space, the values would be the following:

GRM: \$90,000 annual income x 17 average GRM = \$1,530,000

Cap Rate: \$90,000 annual income - \$31,500 expenses = \$58,500 net operating income \$1,900,000

Price Per Unit: 5 Units x \$506,000 average = \$2,530,000

Price per square foot: 5,000sqft x \$360/average sqft = \$1,800,000

The averages based on the subject property are as follows:

GRM: \$1,530,000

Cap Rate: \$1,900,000

Price Per Unit: \$2,530,000

Price per square foot: 1,800,000

The average of the four of these value indicators is: \$1,940,000

If you weigh the GRM and Cap rate for 60% of the value and price per square foot and price per unit as 40% of the value, you have a value of: \$1,895,000

As a broker, we understand what neighborhoods are selling for and if buyers will be willing to pay more or less for certain income and property conditions, but if you want a rough idea, this is a simplified version of how to keep track of your property value.

Written by: Christina Labowicz, Apartment Advisor with ACI Apartments | (858) 876-5701 | Christina.ACIApartments@gmail.com | BOOK A CALL: calendly.com/christina-aciapartments